Correlation Between Erdene Resource and Silver Valley

Can any of the company-specific risk be diversified away by investing in both Erdene Resource and Silver Valley 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 Silver Valley 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 Silver Valley Metals, you can compare the effects of market volatilities on Erdene Resource and Silver Valley 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 Silver Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erdene Resource and Silver Valley.

Diversification Opportunities for Erdene Resource and Silver Valley

-0.47

Correlation Coefficient

Erdene Resource  Silver Valley

Very good diversification

The 3 months correlation between Erdene and Silver is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Erdene Resource Development and Silver Valley Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Valley Metals 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 Silver Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Valley Metals has no effect on the direction of Erdene Resource i.e., Erdene Resource and Silver Valley go up and down completely randomly.

Pair Corralation between Erdene Resource and Silver Valley

Assuming the 90 days trading horizon Erdene Resource Development is expected to under-perform the Silver Valley. But the stock apears to be less risky and, when comparing its historical volatility, Erdene Resource Development is 8.5 times less risky than Silver Valley. The stock trades about -0.13 of its potential returns per unit of risk. The Silver Valley Metals is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  4.50  in Silver Valley Metals on January 17, 2024 and sell it today you would earn a total of  3.00  from holding Silver Valley Metals or generate 66.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Erdene Resource Development  vs.  Silver Valley Metals

Erdene Resource Deve

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Erdene Resource Development are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Erdene Resource displayed solid returns over the last few months and may actually be approaching a breakup point.

Silver Valley Metals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Valley Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, Silver Valley showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Erdene Resource and Silver Valley

The main advantage of trading using opposite Erdene Resource and Silver Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erdene Resource position performs unexpectedly, Silver Valley 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 Silver Valley will offset losses from the drop in Silver Valley's long position.

The idea behind Erdene Resource Development and Silver Valley Metals 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.