Correlation Between Capstone Copper and Ero Copper

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

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

Diversification Opportunities for Capstone Copper and Ero Copper

0.38

Correlation Coefficient

Capstone Copper  Ero Copper

Weak diversification

The 3 months correlation between Capstone and Ero is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Copper Corp and Ero Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ero Copper Corp and Capstone Copper 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 Capstone Copper Corp are associated (or correlated) with Ero Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ero Copper Corp has no effect on the direction of Capstone Copper i.e., Capstone Copper and Ero Copper go up and down completely randomly.

Pair Corralation between Capstone Copper and Ero Copper

Assuming the 90 days horizon Capstone Copper Corp is expected to generate 1.08 times more return on investment than Ero Copper. However, Capstone Copper is 1.08 times more volatile than Ero Copper Corp. It trades about 0.05 of its potential returns per unit of risk. Ero Copper Corp is currently generating about -0.11 per unit of risk. If you would invest  633.00  in Capstone Copper Corp on September 4, 2024 and sell it today you would earn a total of  51.00  from holding Capstone Copper Corp or generate 8.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Capstone Copper Corp  vs.  Ero Copper Corp

Capstone Copper Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capstone Copper Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, Capstone Copper may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ero Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Capstone Copper and Ero Copper

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

The idea behind Capstone Copper Corp and Ero Copper 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.