Correlation Between Emerita Resources and Brunswick Exploration

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

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

Diversification Opportunities for Emerita Resources and Brunswick Exploration

-0.52

Correlation Coefficient

Emerita Resources  Brunswick Exploration

Excellent diversification

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

Pair Corralation between Emerita Resources and Brunswick Exploration

Assuming the 90 days horizon Emerita Resources Corp is expected to generate 0.68 times more return on investment than Brunswick Exploration. However, Emerita Resources Corp is 1.48 times less risky than Brunswick Exploration. It trades about 0.2 of its potential returns per unit of risk. Brunswick Exploration is currently generating about 0.06 per unit of risk. If you would invest  65.00  in Emerita Resources Corp on September 22, 2024 and sell it today you would earn a total of  51.00  from holding Emerita Resources Corp or generate 78.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Emerita Resources Corp  vs.  Brunswick Exploration

Emerita Resources Corp

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Emerita Resources Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Emerita Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Brunswick Exploration

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brunswick Exploration are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Brunswick Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emerita Resources and Brunswick Exploration

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

The idea behind Emerita Resources Corp and Brunswick Exploration 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.