Correlation Between Ero Copper and First Quantum

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

By analyzing existing cross correlation between Ero Copper Corp and First Quantum Minerals, you can compare the effects of market volatilities on Ero Copper and First Quantum 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 Ero Copper with a short position of First Quantum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ero Copper and First Quantum.

Diversification Opportunities for Ero Copper and First Quantum

-0.22

Correlation Coefficient

Ero Copper  First Quantum

Very good diversification

The 3 months correlation between Ero and First is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ero Copper Corp and First Quantum Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Quantum Minerals and Ero Copper 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 Ero Copper Corp are associated (or correlated) with First Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Quantum Minerals has no effect on the direction of Ero Copper i.e., Ero Copper and First Quantum go up and down completely randomly.

Pair Corralation between Ero Copper and First Quantum

Considering the 90-day investment horizon Ero Copper Corp is expected to under-perform the First Quantum. But the etf apears to be less risky and, when comparing its historical volatility, Ero Copper Corp is 1.05 times less risky than First Quantum. The etf trades about -0.19 of its potential returns per unit of risk. The First Quantum Minerals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,235  in First Quantum Minerals on September 15, 2024 and sell it today you would earn a total of  126.00  from holding First Quantum Minerals or generate 10.2% return on investment over 90 days.

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

Ero Copper Corp  vs.  First Quantum Minerals

Ero Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ero Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

First Quantum Minerals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Quantum Minerals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, First Quantum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ero Copper and First Quantum

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

The idea behind Ero Copper Corp and First Quantum Minerals 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.