Correlation Between Puma Exploration and Erdene Resource

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

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

Diversification Opportunities for Puma Exploration and Erdene Resource

-0.26

Correlation Coefficient

Puma Exploration  Erdene Resource

Very good diversification

The 3 months correlation between Puma and Erdene is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Puma Exploration 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 Puma Exploration 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 Puma Exploration 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 Puma Exploration i.e., Puma Exploration and Erdene Resource go up and down completely randomly.

Pair Corralation between Puma Exploration and Erdene Resource

Assuming the 90 days horizon Puma Exploration is expected to generate 2.23 times more return on investment than Erdene Resource. However, Puma Exploration is 2.23 times more volatile than Erdene Resource Development. It trades about 0.04 of its potential returns per unit of risk. Erdene Resource Development is currently generating about -0.03 per unit of risk. If you would invest  5.00  in Puma Exploration on September 24, 2024 and sell it today you would earn a total of  0.00  from holding Puma Exploration or generate 0.0% return on investment over 90 days.

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

Puma Exploration  vs.  Erdene Resource Development

Puma Exploration

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Puma Exploration are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Puma Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Erdene Resource Deve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Erdene Resource Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Puma Exploration and Erdene Resource

The main advantage of trading using opposite Puma Exploration and Erdene Resource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Puma Exploration 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 Puma Exploration 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.