Correlation Between Source Rock and Ecora Resources

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

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

Diversification Opportunities for Source Rock and Ecora Resources

0.67

Correlation Coefficient

Source Rock  Ecora Resources

Poor diversification

The 3 months correlation between Source and Ecora is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Source Rock Royalties and Ecora Resources plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecora Resources plc and Source Rock 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 Source Rock Royalties are associated (or correlated) with Ecora Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecora Resources plc has no effect on the direction of Source Rock i.e., Source Rock and Ecora Resources go up and down completely randomly.

Pair Corralation between Source Rock and Ecora Resources

Assuming the 90 days horizon Source Rock is expected to generate 3.34 times less return on investment than Ecora Resources. But when comparing it to its historical volatility, Source Rock Royalties is 1.79 times less risky than Ecora Resources. It trades about 0.11 of its potential returns per unit of risk. Ecora Resources plc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  102.00  in Ecora Resources plc on May 3, 2025 and sell it today you would earn a total of  33.00  from holding Ecora Resources plc or generate 32.35% return on investment over 90 days.

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

Source Rock Royalties  vs.  Ecora Resources plc

Source Rock Royalties

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Source Rock Royalties are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Source Rock may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Ecora Resources plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ecora Resources plc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Ecora Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Source Rock and Ecora Resources

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

The idea behind Source Rock Royalties and Ecora Resources plc 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.