Correlation Between Eros Resources and Great West

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

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

Diversification Opportunities for Eros Resources and Great West

-0.47

Correlation Coefficient

Eros Resources  Great West

Very good diversification

The 3 months correlation between Eros and Great is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Eros Resources Corp and Great West Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifeco and Eros 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 Eros Resources Corp are associated (or correlated) with Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Lifeco has no effect on the direction of Eros Resources i.e., Eros Resources and Great West go up and down completely randomly.

Pair Corralation between Eros Resources and Great West

Assuming the 90 days horizon Eros Resources Corp is expected to generate 9.82 times more return on investment than Great West. However, Eros Resources is 9.82 times more volatile than Great West Lifeco. It trades about 0.09 of its potential returns per unit of risk. Great West Lifeco is currently generating about -0.13 per unit of risk. If you would invest  3.50  in Eros Resources Corp on September 5, 2024 and sell it today you would earn a total of  1.00  from holding Eros Resources Corp or generate 28.57% return on investment over 90 days.

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

Eros Resources Corp  vs.  Great West Lifeco

Eros Resources Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eros Resources Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Eros Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Great West Lifeco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great West Lifeco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Great West is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eros Resources and Great West

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

The idea behind Eros Resources Corp and Great West Lifeco 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.