Correlation Between Eros Resources and Solitario Exploration

Can any of the company-specific risk be diversified away by investing in both Eros Resources and Solitario 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 Eros Resources and Solitario Exploration 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 Solitario Exploration Royalty, you can compare the effects of market volatilities on Eros Resources and Solitario 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 Eros Resources with a short position of Solitario Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eros Resources and Solitario Exploration.

Diversification Opportunities for Eros Resources and Solitario Exploration

-0.29

Correlation Coefficient

Eros Resources  Solitario Exploration

Very good diversification

The 3 months correlation between Eros and Solitario is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Eros Resources Corp and Solitario Exploration Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solitario Exploration 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 Solitario Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solitario Exploration has no effect on the direction of Eros Resources i.e., Eros Resources and Solitario Exploration go up and down completely randomly.

Pair Corralation between Eros Resources and Solitario Exploration

Assuming the 90 days horizon Eros Resources Corp is expected to generate 1.79 times more return on investment than Solitario Exploration. However, Eros Resources is 1.79 times more volatile than Solitario Exploration Royalty. It trades about 0.08 of its potential returns per unit of risk. Solitario Exploration Royalty is currently generating about -0.05 per unit of risk. If you would invest  3.50  in Eros Resources Corp on September 27, 2024 and sell it today you would earn a total of  1.50  from holding Eros Resources Corp or generate 42.86% return on investment over 90 days.

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

Eros Resources Corp  vs.  Solitario Exploration Royalty

Eros Resources Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eros Resources Corp are ranked lower than 4 (%) 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.

Solitario Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solitario Exploration Royalty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Solitario Exploration is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Eros Resources and Solitario Exploration

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

The idea behind Eros Resources Corp and Solitario Exploration Royalty 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.