Correlation Between Eros Resources and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Eros Resources and Dow Jones 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 Eros Resources and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eros Resources Corp and Dow Jones Industrial, you can compare the effects of market volatilities on Eros Resources and Dow Jones 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 Eros Resources with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eros Resources and Dow Jones.
Diversification Opportunities for Eros Resources and Dow Jones
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eros and Dow is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Eros Resources Corp and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Eros 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 Eros Resources Corp are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Eros Resources i.e., Eros Resources and Dow Jones go up and down completely randomly.
Pair Corralation between Eros Resources and Dow Jones
Assuming the 90 days horizon Eros Resources Corp is expected to under-perform the Dow Jones. But the otc stock apears to be less risky and, when comparing its historical volatility, Eros Resources Corp is 9.21 times less risky than Dow Jones. The otc stock trades about -0.21 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 233,449 from holding Dow Jones Industrial or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eros Resources Corp vs. Dow Jones Industrial
Performance |
| Timeline |
Eros Resources and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Eros Resources Corp
Pair trading matchups for Eros Resources
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Eros Resources and Dow Jones
The main advantage of trading using opposite Eros Resources and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eros Resources position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Eros Resources vs. Rockridge Resources | Eros Resources vs. Ameriwest Lithium | Eros Resources vs. Osisko Metals Incorporated | Eros Resources vs. Volt Lithium Corp |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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