Correlation Between E79 Resources and Australian Mines

Can any of the company-specific risk be diversified away by investing in both E79 Resources and Australian Mines 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 E79 Resources and Australian Mines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between E79 Resources Corp and Australian Mines Limited, you can compare the effects of market volatilities on E79 Resources and Australian Mines 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 E79 Resources with a short position of Australian Mines. Check out your portfolio center. Please also check ongoing floating volatility patterns of E79 Resources and Australian Mines.

Diversification Opportunities for E79 Resources and Australian Mines

0.21

Correlation Coefficient

E79 Resources  Australian Mines

Modest diversification

The 3 months correlation between E79 and Australian is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding E79 Resources Corp and Australian Mines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Mines and E79 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 E79 Resources Corp are associated (or correlated) with Australian Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Mines has no effect on the direction of E79 Resources i.e., E79 Resources and Australian Mines go up and down completely randomly.

Pair Corralation between E79 Resources and Australian Mines

Assuming the 90 days horizon E79 Resources Corp is expected to under-perform the Australian Mines. But the otc stock apears to be less risky and, when comparing its historical volatility, E79 Resources Corp is 8.07 times less risky than Australian Mines. The otc stock trades about -0.21 of its potential returns per unit of risk. The Australian Mines Limited is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.44  in Australian Mines Limited on February 24, 2024 and sell it today you would earn a total of  0.30  from holding Australian Mines Limited or generate 68.18% return on investment over 90 days.

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

E79 Resources Corp  vs.  Australian Mines Limited

E79 Resources Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in E79 Resources Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, E79 Resources may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Australian Mines

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Mines Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Australian Mines reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with E79 Resources and Australian Mines

The main advantage of trading using opposite E79 Resources and Australian Mines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E79 Resources position performs unexpectedly, Australian Mines 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 Australian Mines will offset losses from the drop in Australian Mines' long position.

The idea behind E79 Resources Corp and Australian Mines Limited 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..