Correlation Between Copper Lake and Erdene Resource

Can any of the company-specific risk be diversified away by investing in both Copper Lake 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 Copper Lake and Erdene Resource into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Copper Lake Resources and Erdene Resource Development, you can compare the effects of market volatilities on Copper Lake 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 Copper Lake with a short position of Erdene Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Copper Lake and Erdene Resource.

Diversification Opportunities for Copper Lake and Erdene Resource

0.55

Correlation Coefficient

Copper Lake  Erdene Resource

Very weak diversification

The 3 months correlation between Copper and Erdene is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Copper Lake Resources 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 Copper Lake 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 Copper Lake Resources 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 Copper Lake i.e., Copper Lake and Erdene Resource go up and down completely randomly.

Pair Corralation between Copper Lake and Erdene Resource

Assuming the 90 days horizon Copper Lake Resources is expected to generate 15.57 times more return on investment than Erdene Resource. However, Copper Lake is 15.57 times more volatile than Erdene Resource Development. It trades about 0.15 of its potential returns per unit of risk. Erdene Resource Development is currently generating about -0.14 per unit of risk. If you would invest  0.90  in Copper Lake Resources on October 5, 2024 and sell it today you would lose (0.20) from holding Copper Lake Resources or give up 22.22% of portfolio value over 90 days.

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

Copper Lake Resources  vs.  Erdene Resource Development

Copper Lake Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Copper Lake Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Copper Lake reported solid returns over the last few months and may actually be approaching a breakup point.

Erdene Resource Deve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Erdene Resource Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Copper Lake and Erdene Resource

The main advantage of trading using opposite Copper Lake and Erdene Resource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copper Lake 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 Copper Lake Resources 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.