Correlation Between Ero Copper and Solaris Resources
Can any of the company-specific risk be diversified away by investing in both Ero Copper and Solaris 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 Ero Copper and Solaris Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ero Copper Corp and Solaris Resources, you can compare the effects of market volatilities on Ero Copper and Solaris 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 Ero Copper with a short position of Solaris Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ero Copper and Solaris Resources.
Diversification Opportunities for Ero Copper and Solaris Resources
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ero and Solaris is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ero Copper Corp and Solaris Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solaris Resources and Ero Copper 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 Ero Copper Corp are associated (or correlated) with Solaris Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solaris Resources has no effect on the direction of Ero Copper i.e., Ero Copper and Solaris Resources go up and down completely randomly.
Pair Corralation between Ero Copper and Solaris Resources
Assuming the 90 days trading horizon Ero Copper Corp is expected to generate 0.75 times more return on investment than Solaris Resources. However, Ero Copper Corp is 1.33 times less risky than Solaris Resources. It trades about -0.01 of its potential returns per unit of risk. Solaris Resources is currently generating about 0.0 per unit of risk. If you would invest 2,670 in Ero Copper Corp on August 28, 2024 and sell it today you would lose (476.00) from holding Ero Copper Corp or give up 17.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ero Copper Corp vs. Solaris Resources
Performance |
| Timeline |
| Ero Copper Corp |
| Solaris Resources |
Ero Copper and Solaris Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ero Copper and Solaris Resources
The main advantage of trading using opposite Ero Copper and Solaris Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ero Copper position performs unexpectedly, Solaris 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 Solaris Resources will offset losses from the drop in Solaris Resources' long position.The idea behind Ero Copper Corp and Solaris Resources 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.| Solaris Resources vs. Filo Mining Corp | Solaris Resources vs. Equinox Gold Corp | Solaris Resources vs. Ero Copper Corp | Solaris Resources vs. Skeena 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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