Correlation Between Aeorema Communications and Endeavour Mining

Can any of the company-specific risk be diversified away by investing in both Aeorema Communications and Endeavour Mining 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 Aeorema Communications and Endeavour Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aeorema Communications Plc and Endeavour Mining Corp, you can compare the effects of market volatilities on Aeorema Communications and Endeavour Mining 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 Aeorema Communications with a short position of Endeavour Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeorema Communications and Endeavour Mining.

Diversification Opportunities for Aeorema Communications and Endeavour Mining

-0.62

Correlation Coefficient

Aeorema Communications  Endeavour Mining

Excellent diversification

The 3 months correlation between Aeorema and Endeavour is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and Endeavour Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endeavour Mining Corp and Aeorema Communications 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 Aeorema Communications Plc are associated (or correlated) with Endeavour Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endeavour Mining Corp has no effect on the direction of Aeorema Communications i.e., Aeorema Communications and Endeavour Mining go up and down completely randomly.

Pair Corralation between Aeorema Communications and Endeavour Mining

Assuming the 90 days trading horizon Aeorema Communications Plc is expected to generate 0.63 times more return on investment than Endeavour Mining. However, Aeorema Communications Plc is 1.58 times less risky than Endeavour Mining. It trades about 0.1 of its potential returns per unit of risk. Endeavour Mining Corp is currently generating about -0.19 per unit of risk. If you would invest  5,277  in Aeorema Communications Plc on September 26, 2024 and sell it today you would earn a total of  423.00  from holding Aeorema Communications Plc or generate 8.02% return on investment over 90 days.

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

Aeorema Communications Plc  vs.  Endeavour Mining Corp

Aeorema Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aeorema Communications Plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Aeorema Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Endeavour Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Endeavour Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Aeorema Communications and Endeavour Mining

The main advantage of trading using opposite Aeorema Communications and Endeavour Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeorema Communications position performs unexpectedly, Endeavour Mining 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 Endeavour Mining will offset losses from the drop in Endeavour Mining's long position.

The idea behind Aeorema Communications Plc and Endeavour Mining Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.