Correlation Between Entree Resources and Teck Resources

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

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

Diversification Opportunities for Entree Resources and Teck Resources

0.71

Correlation Coefficient

Entree Resources  Teck Resources

Poor diversification

The 3 months correlation between Entree and Teck is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Entree Resources and Teck Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teck Resources and Entree 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 Entree Resources are associated (or correlated) with Teck Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teck Resources has no effect on the direction of Entree Resources i.e., Entree Resources and Teck Resources go up and down completely randomly.

Pair Corralation between Entree Resources and Teck Resources

Assuming the 90 days trading horizon Entree Resources is expected to under-perform the Teck Resources. But the stock apears to be less risky and, when comparing its historical volatility, Entree Resources is 1.14 times less risky than Teck Resources. The stock trades about -0.01 of its potential returns per unit of risk. The Teck Resources Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  6,816  in Teck Resources Limited on March 7, 2024 and sell it today you would lose (33.00) from holding Teck Resources Limited or give up 0.48% of portfolio value over 90 days.

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

Entree Resources  vs.  Teck Resources Limited

Entree Resources

Risk-Adjusted Performance

9 of 100

OK

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

Teck Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Teck Resources Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Teck Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Entree Resources and Teck Resources

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

The idea behind Entree Resources and Teck Resources 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.