Correlation Between New Destiny and Eros Resources

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

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

Diversification Opportunities for New Destiny and Eros Resources

0.2

Correlation Coefficient

New Destiny  Eros Resources

Modest diversification

The 3 months correlation between New and Eros is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding New Destiny 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 New Destiny 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 New Destiny 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 New Destiny i.e., New Destiny and Eros Resources go up and down completely randomly.

Pair Corralation between New Destiny and Eros Resources

Assuming the 90 days horizon New Destiny Mining is expected to under-perform the Eros Resources. But the stock apears to be less risky and, when comparing its historical volatility, New Destiny Mining is 1.19 times less risky than Eros Resources. The stock trades about -0.19 of its potential returns per unit of risk. The Eros Resources Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4.50  in Eros Resources Corp on October 1, 2024 and sell it today you would lose (0.50) from holding Eros Resources Corp or give up 11.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

New Destiny Mining  vs.  Eros Resources Corp

New Destiny Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Destiny Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 New Destiny and Eros Resources

The main advantage of trading using opposite New Destiny and Eros Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Destiny 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 New Destiny 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.