Correlation Between Arch Resources and Ero Copper

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Can any of the company-specific risk be diversified away by investing in both Arch Resources and Ero Copper 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 Arch Resources and Ero Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arch Resources and Ero Copper Corp, you can compare the effects of market volatilities on Arch Resources and Ero Copper 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 Arch Resources with a short position of Ero Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Resources and Ero Copper.

Diversification Opportunities for Arch Resources and Ero Copper

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between Arch Resources and Ero Copper is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Arch Resources and Ero Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ero Copper Corp and Arch 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 Arch Resources are associated (or correlated) with Ero Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ero Copper Corp has no effect on the direction of Arch Resources i.e., Arch Resources and Ero Copper go up and down completely randomly.

Pair Corralation between Arch Resources and Ero Copper

Given the investment horizon of 90 days Arch Resources is expected to generate 1.08 times more return on investment than Ero Copper. However, Arch Resources is 1.08 times more volatile than Ero Copper Corp. It trades about 0.08 of its potential returns per unit of risk. Ero Copper Corp is currently generating about 0.0 per unit of risk. If you would invest  4,167  in Arch Resources on June 30, 2022 and sell it today you would earn a total of  8,002  from holding Arch Resources or generate 192.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Arch Resources  vs.  Ero Copper Corp

 Performance (%) 
       Timeline  
Arch Resources 
Arch Resources Performance
0 of 100
Over the last 90 days Arch Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest sluggish performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Arch Resources Price Channel

Ero Copper Corp 
Ero Copper Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ero Copper Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Ero Copper disclosed solid returns over the last few months and may actually be approaching a breakup point.

Ero Copper Price Channel

Arch Resources and Ero Copper Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Arch Resources and Ero Copper

The main advantage of trading using opposite Arch Resources and Ero Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arch Resources position performs unexpectedly, Ero Copper 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 Ero Copper will offset losses from the drop in Ero Copper's long position.
Arch Resources vs. Vroom Inc
The idea behind Arch Resources and Ero Copper 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.
Ero Copper vs. Microsoft Corp
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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