Correlation Between Faraday Copper and Entree Resources
Can any of the company-specific risk be diversified away by investing in both Faraday Copper and Entree 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 Faraday Copper and Entree Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Faraday Copper Corp and Entree Resources, you can compare the effects of market volatilities on Faraday Copper and Entree 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 Faraday Copper with a short position of Entree Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faraday Copper and Entree Resources.
Diversification Opportunities for Faraday Copper and Entree Resources
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Faraday and Entree is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Copper Corp and Entree Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entree Resources and Faraday 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 Faraday Copper Corp are associated (or correlated) with Entree Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entree Resources has no effect on the direction of Faraday Copper i.e., Faraday Copper and Entree Resources go up and down completely randomly.
Pair Corralation between Faraday Copper and Entree Resources
Assuming the 90 days trading horizon Faraday Copper Corp is expected to under-perform the Entree Resources. But the stock apears to be less risky and, when comparing its historical volatility, Faraday Copper Corp is 2.23 times less risky than Entree Resources. The stock trades about -0.01 of its potential returns per unit of risk. The Entree Resources is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 213.00 in Entree Resources on November 4, 2024 and sell it today you would earn a total of 43.00 from holding Entree Resources or generate 20.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Faraday Copper Corp vs. Entree Resources
Performance |
| Timeline |
| Faraday Copper Corp |
| Entree Resources |
Faraday Copper and Entree Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Faraday Copper and Entree Resources
The main advantage of trading using opposite Faraday Copper and Entree Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faraday Copper position performs unexpectedly, Entree 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 Entree Resources will offset losses from the drop in Entree Resources' long position.The idea behind Faraday Copper Corp and Entree 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.| Entree Resources vs. Solitario Exploration Royalty | Entree Resources vs. Globex Mining Enterprises | Entree Resources vs. Northcliff Resources | Entree Resources vs. St Augustine Gold |
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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