Correlation Between Atlas Corp and Erdene Resource

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

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

Diversification Opportunities for Atlas Corp and Erdene Resource

-0.39

Correlation Coefficient

Atlas Corp  Erdene Resource

Very good diversification

The 3 months correlation between Atlas and Erdene is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Corp 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 Atlas Corp 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 Atlas Corp 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 Atlas Corp i.e., Atlas Corp and Erdene Resource go up and down completely randomly.

Pair Corralation between Atlas Corp and Erdene Resource

Assuming the 90 days horizon Atlas Corp is expected to generate 0.09 times more return on investment than Erdene Resource. However, Atlas Corp is 11.05 times less risky than Erdene Resource. It trades about 0.07 of its potential returns per unit of risk. Erdene Resource Development is currently generating about 0.0 per unit of risk. If you would invest  2,471  in Atlas Corp on September 23, 2024 and sell it today you would earn a total of  39.00  from holding Atlas Corp or generate 1.58% return on investment over 90 days.

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

Atlas Corp  vs.  Erdene Resource Development

Atlas Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Atlas Corp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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 nearly stable fundamental indicators, Erdene Resource is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Atlas Corp and Erdene Resource

The main advantage of trading using opposite Atlas Corp and Erdene Resource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlas Corp 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 Atlas Corp 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.