Correlation Between VersaBank and Erdene Resource

Can any of the company-specific risk be diversified away by investing in both VersaBank and Erdene Resource at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining VersaBank and Erdene Resource into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VersaBank and Erdene Resource Development, you can compare the effects of market volatilities on VersaBank and Erdene Resource and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in VersaBank with a short position of Erdene Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of VersaBank and Erdene Resource.

Diversification Opportunities for VersaBank and Erdene Resource

-0.78

Correlation Coefficient

VersaBank  Erdene Resource

Pay attention - limited upside

The 3 months correlation between VersaBank and Erdene is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and Erdene Resource Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erdene Resource Deve and VersaBank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on VersaBank are associated (or correlated) with Erdene Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erdene Resource Deve has no effect on the direction of VersaBank i.e., VersaBank and Erdene Resource go up and down completely randomly.

Pair Corralation between VersaBank and Erdene Resource

Assuming the 90 days trading horizon VersaBank is expected to under-perform the Erdene Resource. But the stock apears to be less risky and, when comparing its historical volatility, VersaBank is 1.28 times less risky than Erdene Resource. The stock trades about -0.17 of its potential returns per unit of risk. The Erdene Resource Development is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  54.00  in Erdene Resource Development on December 24, 2024 and sell it today you would earn a total of  25.00  from holding Erdene Resource Development or generate 46.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

VersaBank  vs.  Erdene Resource Development

VersaBank

Risk-Adjusted Performance

Very Weak

Over the last 90 days VersaBank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Erdene Resource Deve

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erdene Resource Development are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Erdene Resource displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VersaBank and Erdene Resource

The main advantage of trading using opposite VersaBank and Erdene Resource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VersaBank position performs unexpectedly, Erdene Resource can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Erdene Resource will offset losses from the drop in Erdene Resource's long position.

The idea behind VersaBank and Erdene Resource Development pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.