Correlation Between Orezone Gold and Ero Copper

Can any of the company-specific risk be diversified away by investing in both Orezone Gold 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 Orezone Gold and Ero Copper 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 Ero Copper Corp, you can compare the effects of market volatilities on Orezone Gold 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 Orezone Gold with a short position of Ero Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orezone Gold and Ero Copper.

Diversification Opportunities for Orezone Gold and Ero Copper

0.86

Correlation Coefficient

Orezone Gold  Ero Copper

Very poor diversification

The 3 months correlation between Orezone and Ero is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Orezone Gold Corp 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 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 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 Orezone Gold i.e., Orezone Gold and Ero Copper go up and down completely randomly.

Pair Corralation between Orezone Gold and Ero Copper

Assuming the 90 days trading horizon Orezone Gold Corp is expected to generate 1.45 times more return on investment than Ero Copper. However, Orezone Gold is 1.45 times more volatile than Ero Copper Corp. It trades about -0.05 of its potential returns per unit of risk. Ero Copper Corp is currently generating about -0.23 per unit of risk. If you would invest  74.00  in Orezone Gold Corp on September 23, 2024 and sell it today you would lose (12.00) from holding Orezone Gold Corp or give up 16.22% of portfolio value over 90 days.

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

Orezone Gold Corp  vs.  Ero Copper Corp

Orezone Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orezone Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental 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 firm investors.

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 abnormal performance in the last few months, the Stock'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 firm investors.

Pair Trading with Orezone Gold and Ero Copper

The main advantage of trading using opposite Orezone Gold and Ero Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orezone Gold 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 Orezone Gold Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.