Correlation Between Erdene Resource and South32
Can any of the company-specific risk be diversified away by investing in both Erdene Resource and South32 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 Erdene Resource and South32 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Erdene Resource Development and South32 Limited, you can compare the effects of market volatilities on Erdene Resource and South32 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 Erdene Resource with a short position of South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erdene Resource and South32.
Diversification Opportunities for Erdene Resource and South32
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Erdene and South32 is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Erdene Resource Development and South32 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 Limited and Erdene Resource 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 Erdene Resource Development are associated (or correlated) with South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 Limited has no effect on the direction of Erdene Resource i.e., Erdene Resource and South32 go up and down completely randomly.
Pair Corralation between Erdene Resource and South32
Assuming the 90 days horizon Erdene Resource Development is expected to under-perform the South32. In addition to that, Erdene Resource is 1.49 times more volatile than South32 Limited. It trades about -0.16 of its total potential returns per unit of risk. South32 Limited is currently generating about -0.1 per unit of volatility. If you would invest 240.00 in South32 Limited on September 1, 2024 and sell it today you would lose (13.00) from holding South32 Limited or give up 5.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Erdene Resource Development vs. South32 Limited
Performance |
| Timeline |
| Erdene Resource Deve |
| South32 Limited |
Erdene Resource and South32 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erdene Resource and South32
The main advantage of trading using opposite Erdene Resource and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erdene Resource position performs unexpectedly, South32 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 South32 will offset losses from the drop in South32's long position.| Erdene Resource vs. South32 Limited | Erdene Resource vs. NioCorp Developments Ltd | Erdene Resource vs. HUMANA INC | Erdene Resource vs. SCOR PK |
| South32 vs. IGO Limited | South32 vs. Anglo American PLC | South32 vs. TNG Limited | South32 vs. Amarc Resources |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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