Correlation Between EQ Resources and Resource Base
Can any of the company-specific risk be diversified away by investing in both EQ Resources and Resource Base 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 EQ Resources and Resource Base into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EQ Resources and Resource Base, you can compare the effects of market volatilities on EQ Resources and Resource Base 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 EQ Resources with a short position of Resource Base. Check out your portfolio center. Please also check ongoing floating volatility patterns of EQ Resources and Resource Base.
Diversification Opportunities for EQ Resources and Resource Base
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between EQR and Resource is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding EQ Resources and Resource Base in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resource Base and EQ Resources 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 EQ Resources are associated (or correlated) with Resource Base. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resource Base has no effect on the direction of EQ Resources i.e., EQ Resources and Resource Base go up and down completely randomly.
Pair Corralation between EQ Resources and Resource Base
Assuming the 90 days trading horizon EQ Resources is expected to generate 1.6 times more return on investment than Resource Base. However, EQ Resources is 1.6 times more volatile than Resource Base. It trades about 0.13 of its potential returns per unit of risk. Resource Base is currently generating about 0.17 per unit of risk. If you would invest 4.90 in EQ Resources on September 2, 2024 and sell it today you would earn a total of 0.60 from holding EQ Resources or generate 12.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EQ Resources vs. Resource Base
Performance |
| Timeline |
| EQ Resources |
| Resource Base |
EQ Resources and Resource Base Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EQ Resources and Resource Base
The main advantage of trading using opposite EQ Resources and Resource Base positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EQ Resources position performs unexpectedly, Resource Base 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 Resource Base will offset losses from the drop in Resource Base's long position.| EQ Resources vs. Sky Metals | EQ Resources vs. Leeuwin Metals | EQ Resources vs. Black Rock Mining | EQ Resources vs. DY6 Metals |
| Resource Base vs. The Environmental Group | Resource Base vs. Credit Clear | Resource Base vs. Duxton Broadacre Farms | Resource Base vs. Hawsons Iron |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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