Correlation Between EROAD and Horseshoe Metals

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

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

Diversification Opportunities for EROAD and Horseshoe Metals

-0.33

Correlation Coefficient

EROAD  Horseshoe Metals

Very good diversification

The 3 months correlation between EROAD and Horseshoe is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding EROAD and Horseshoe Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horseshoe Metals and EROAD 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 EROAD are associated (or correlated) with Horseshoe Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horseshoe Metals has no effect on the direction of EROAD i.e., EROAD and Horseshoe Metals go up and down completely randomly.

Pair Corralation between EROAD and Horseshoe Metals

Assuming the 90 days trading horizon EROAD is expected to generate 2.73 times less return on investment than Horseshoe Metals. But when comparing it to its historical volatility, EROAD is 3.48 times less risky than Horseshoe Metals. It trades about 0.34 of its potential returns per unit of risk. Horseshoe Metals is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  0.90  in Horseshoe Metals on September 25, 2024 and sell it today you would earn a total of  0.50  from holding Horseshoe Metals or generate 55.56% return on investment over 90 days.

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

EROAD  vs.  Horseshoe Metals

EROAD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EROAD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Horseshoe Metals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Horseshoe Metals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Horseshoe Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EROAD and Horseshoe Metals

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

The idea behind EROAD and Horseshoe Metals 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.