Correlation Between Midnight Sun and Eros Resources

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

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

Diversification Opportunities for Midnight Sun and Eros Resources

0.48

Correlation Coefficient

Midnight Sun  Eros Resources

Very weak diversification

The 3 months correlation between Midnight and Eros is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Midnight Sun Mining and Eros Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eros Resources Corp and Midnight Sun 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 Midnight Sun Mining are associated (or correlated) with Eros Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eros Resources Corp has no effect on the direction of Midnight Sun i.e., Midnight Sun and Eros Resources go up and down completely randomly.

Pair Corralation between Midnight Sun and Eros Resources

Assuming the 90 days horizon Midnight Sun Mining is expected to generate 1.29 times more return on investment than Eros Resources. However, Midnight Sun is 1.29 times more volatile than Eros Resources Corp. It trades about 0.07 of its potential returns per unit of risk. Eros Resources Corp is currently generating about 0.04 per unit of risk. If you would invest  27.00  in Midnight Sun Mining on October 1, 2024 and sell it today you would earn a total of  25.00  from holding Midnight Sun Mining or generate 92.59% return on investment over 90 days.

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

Midnight Sun Mining  vs.  Eros Resources Corp

Midnight Sun Mining

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Midnight Sun Mining are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Midnight Sun showed solid returns over the last few months and may actually be approaching a breakup point.

Eros Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eros Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Eros Resources is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Midnight Sun and Eros Resources

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

The idea behind Midnight Sun Mining and Eros Resources 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.