Correlation Between Big Ridge and Eloro Resources

Can any of the company-specific risk be diversified away by investing in both Big Ridge and Eloro Resources 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 Big Ridge and Eloro Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big Ridge Gold and Eloro Resources, you can compare the effects of market volatilities on Big Ridge and Eloro Resources 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 Big Ridge with a short position of Eloro Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Ridge and Eloro Resources.

Diversification Opportunities for Big Ridge and Eloro Resources

0.52

Correlation Coefficient

Big Ridge  Eloro Resources

Very weak diversification

The 3 months correlation between Big and Eloro is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Big Ridge Gold and Eloro Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eloro Resources and Big Ridge 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 Big Ridge Gold are associated (or correlated) with Eloro Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eloro Resources has no effect on the direction of Big Ridge i.e., Big Ridge and Eloro Resources go up and down completely randomly.

Pair Corralation between Big Ridge and Eloro Resources

Assuming the 90 days horizon Big Ridge Gold is expected to under-perform the Eloro Resources. In addition to that, Big Ridge is 1.16 times more volatile than Eloro Resources. It trades about -0.06 of its total potential returns per unit of risk. Eloro Resources is currently generating about 0.0 per unit of volatility. If you would invest  59.00  in Eloro Resources on September 22, 2024 and sell it today you would lose (2.00) from holding Eloro Resources or give up 3.39% of portfolio value over 90 days.

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

Big Ridge Gold  vs.  Eloro Resources

Big Ridge Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Big Ridge Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Big Ridge reported solid returns over the last few months and may actually be approaching a breakup point.

Eloro Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eloro Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Big Ridge and Eloro Resources

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

The idea behind Big Ridge Gold and Eloro Resources 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.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.