Correlation Between First Quantum and Ero Copper

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

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

Diversification Opportunities for First Quantum and Ero Copper

-0.22

Correlation Coefficient

First Quantum  Ero Copper

Very good diversification

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

Pair Corralation between First Quantum and Ero Copper

Assuming the 90 days horizon First Quantum Minerals is expected to generate 1.05 times more return on investment than Ero Copper. However, First Quantum is 1.05 times more volatile than Ero Copper Corp. It trades about 0.07 of its potential returns per unit of risk. Ero Copper Corp is currently generating about -0.19 per unit of risk. 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

First Quantum Minerals  vs.  Ero Copper Corp

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.

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.

Pair Trading with First Quantum and Ero Copper

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

The idea behind First Quantum Minerals and Ero Copper Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.