Correlation Between Ecofibre and Errawarra Resources
Can any of the company-specific risk be diversified away by investing in both Ecofibre and Errawarra 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 Ecofibre and Errawarra Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecofibre and Errawarra Resources, you can compare the effects of market volatilities on Ecofibre and Errawarra 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 Ecofibre with a short position of Errawarra Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecofibre and Errawarra Resources.
Diversification Opportunities for Ecofibre and Errawarra Resources
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ecofibre and Errawarra is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ecofibre and Errawarra Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Errawarra Resources and Ecofibre 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 Ecofibre are associated (or correlated) with Errawarra Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Errawarra Resources has no effect on the direction of Ecofibre i.e., Ecofibre and Errawarra Resources go up and down completely randomly.
Pair Corralation between Ecofibre and Errawarra Resources
Assuming the 90 days trading horizon Ecofibre is expected to generate 1.08 times more return on investment than Errawarra Resources. However, Ecofibre is 1.08 times more volatile than Errawarra Resources. It trades about -0.05 of its potential returns per unit of risk. Errawarra Resources is currently generating about -0.29 per unit of risk. If you would invest 3.10 in Ecofibre on November 18, 2024 and sell it today you would lose (0.30) from holding Ecofibre or give up 9.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecofibre vs. Errawarra Resources
Performance |
| Timeline |
| Ecofibre |
| Errawarra Resources |
Ecofibre and Errawarra Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecofibre and Errawarra Resources
The main advantage of trading using opposite Ecofibre and Errawarra Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecofibre position performs unexpectedly, Errawarra 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 Errawarra Resources will offset losses from the drop in Errawarra Resources' long position.| Ecofibre vs. Metro Mining | Ecofibre vs. Andean Silver Limited | Ecofibre vs. Autosports Group | Ecofibre vs. Balkan Mining and |
| Errawarra Resources vs. Black Rock Mining | Errawarra Resources vs. Aeon Metals | Errawarra Resources vs. Macquarie Technology Group | Errawarra Resources vs. Perseus Mining |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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