Correlation Between Orezone Gold and Erdene Resource

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

By analyzing existing cross correlation between Orezone Gold Corp and Erdene Resource Development, you can compare the effects of market volatilities on Orezone Gold and Erdene Resource 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 Orezone Gold with a short position of Erdene Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orezone Gold and Erdene Resource.

Diversification Opportunities for Orezone Gold and Erdene Resource

0.34

Correlation Coefficient

Orezone Gold  Erdene Resource

Weak diversification

The 3 months correlation between Orezone and Erdene is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Orezone Gold Corp and Erdene Resource Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erdene Resource Deve and Orezone Gold 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 Orezone Gold Corp are associated (or correlated) with Erdene Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erdene Resource Deve has no effect on the direction of Orezone Gold i.e., Orezone Gold and Erdene Resource go up and down completely randomly.

Pair Corralation between Orezone Gold and Erdene Resource

Assuming the 90 days trading horizon Orezone Gold Corp is expected to generate 1.56 times more return on investment than Erdene Resource. However, Orezone Gold is 1.56 times more volatile than Erdene Resource Development. It trades about -0.02 of its potential returns per unit of risk. Erdene Resource Development is currently generating about -0.13 per unit of risk. If you would invest  74.00  in Orezone Gold Corp on September 5, 2024 and sell it today you would lose (3.00) from holding Orezone Gold Corp or give up 4.05% of portfolio value over 90 days.

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

Orezone Gold Corp  vs.  Erdene Resource Development

Orezone Gold Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orezone Gold Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Orezone Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Erdene Resource Deve

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Erdene Resource Development are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Erdene Resource displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orezone Gold and Erdene Resource

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

The idea behind Orezone Gold Corp and Erdene Resource Development 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.