Correlation Between Emerita Resources and Colonial Coal

Can any of the company-specific risk be diversified away by investing in both Emerita Resources and Colonial Coal 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 Colonial Coal 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 Colonial Coal International, you can compare the effects of market volatilities on Emerita Resources and Colonial Coal 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 Colonial Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerita Resources and Colonial Coal.

Diversification Opportunities for Emerita Resources and Colonial Coal

-0.17

Correlation Coefficient

Emerita Resources  Colonial Coal

Good diversification

The 3 months correlation between Emerita and Colonial is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Emerita Resources Corp and Colonial Coal International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colonial Coal Intern 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 Colonial Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colonial Coal Intern has no effect on the direction of Emerita Resources i.e., Emerita Resources and Colonial Coal go up and down completely randomly.

Pair Corralation between Emerita Resources and Colonial Coal

Assuming the 90 days horizon Emerita Resources Corp is expected to generate 1.29 times more return on investment than Colonial Coal. However, Emerita Resources is 1.29 times more volatile than Colonial Coal International. It trades about 0.14 of its potential returns per unit of risk. Colonial Coal International is currently generating about -0.18 per unit of risk. If you would invest  62.00  in Emerita Resources Corp on September 12, 2024 and sell it today you would earn a total of  24.00  from holding Emerita Resources Corp or generate 38.71% return on investment over 90 days.

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

Emerita Resources Corp  vs.  Colonial Coal International

Emerita Resources Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emerita Resources Corp are ranked lower than 11 (%) 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.

Colonial Coal Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Colonial Coal International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Emerita Resources and Colonial Coal

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

The idea behind Emerita Resources Corp and Colonial Coal International 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.