Correlation Between European Residential and Erdene Resource
Can any of the company-specific risk be diversified away by investing in both European Residential 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 European Residential and Erdene Resource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Residential Real and Erdene Resource Development, you can compare the effects of market volatilities on European Residential 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 European Residential with a short position of Erdene Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Erdene Resource.
Diversification Opportunities for European Residential and Erdene Resource
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between European and Erdene is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real 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 European Residential 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 European Residential Real 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 European Residential i.e., European Residential and Erdene Resource go up and down completely randomly.
Pair Corralation between European Residential and Erdene Resource
Assuming the 90 days trading horizon European Residential is expected to generate 2.78 times less return on investment than Erdene Resource. But when comparing it to its historical volatility, European Residential Real is 1.93 times less risky than Erdene Resource. It trades about 0.04 of its potential returns per unit of risk. Erdene Resource Development is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 33.00 in Erdene Resource Development on September 4, 2024 and sell it today you would earn a total of 27.00 from holding Erdene Resource Development or generate 81.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Residential Real vs. Erdene Resource Development
Performance |
| Timeline |
| European Residential Real |
| Erdene Resource Deve |
European Residential and Erdene Resource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Residential and Erdene Resource
The main advantage of trading using opposite European Residential and Erdene Resource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Residential 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.| European Residential vs. BSR Real Estate | European Residential vs. Minto Apartment Real | European Residential vs. Nexus Real Estate | European Residential vs. Morguard North American |
| Erdene Resource vs. Kore Mining | Erdene Resource vs. Canagold Resources | Erdene Resource vs. Grande Portage Resources | Erdene Resource vs. Bluestone 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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