Correlation Between Erdene Resource and Titan Mining

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

Diversification Opportunities for Erdene Resource and Titan Mining

-0.22

Correlation Coefficient

Erdene Resource  Titan Mining

Very good diversification

The 3 months correlation between Erdene and Titan is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Erdene Resource Development and Titan Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Mining Corp 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 Titan Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Mining Corp has no effect on the direction of Erdene Resource i.e., Erdene Resource and Titan Mining go up and down completely randomly.

Pair Corralation between Erdene Resource and Titan Mining

Assuming the 90 days trading horizon Erdene Resource is expected to generate 45.89 times less return on investment than Titan Mining. But when comparing it to its historical volatility, Erdene Resource Development is 5.13 times less risky than Titan Mining. It trades about 0.01 of its potential returns per unit of risk. Titan Mining Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Titan Mining Corp on January 26, 2024 and sell it today you would earn a total of  2.00  from holding Titan Mining Corp or generate 6.9% return on investment over 90 days.

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

Erdene Resource Development  vs.  Titan Mining Corp

Erdene Resource Deve

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Erdene Resource Development are ranked lower than 12 (%) 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.

Titan Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Titan Mining is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Erdene Resource and Titan Mining

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

The idea behind Erdene Resource Development and Titan Mining Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .