Correlation Between Aldebaran Resources and Eramet SA

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

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

Diversification Opportunities for Aldebaran Resources and Eramet SA

-0.82

Correlation Coefficient

Aldebaran Resources  Eramet SA

Pay attention - limited upside

The 3 months correlation between Aldebaran and Eramet is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Aldebaran Resources and Eramet SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eramet SA ADR and Aldebaran 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 Aldebaran Resources are associated (or correlated) with Eramet SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eramet SA ADR has no effect on the direction of Aldebaran Resources i.e., Aldebaran Resources and Eramet SA go up and down completely randomly.

Pair Corralation between Aldebaran Resources and Eramet SA

Assuming the 90 days horizon Aldebaran Resources is expected to generate 1.28 times more return on investment than Eramet SA. However, Aldebaran Resources is 1.28 times more volatile than Eramet SA ADR. It trades about 0.25 of its potential returns per unit of risk. Eramet SA ADR is currently generating about -0.06 per unit of risk. If you would invest  69.00  in Aldebaran Resources on September 12, 2024 and sell it today you would earn a total of  66.00  from holding Aldebaran Resources or generate 95.65% return on investment over 90 days.

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

Aldebaran Resources  vs.  Eramet SA ADR

Aldebaran Resources

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aldebaran Resources are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aldebaran Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Eramet SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eramet SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Aldebaran Resources and Eramet SA

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

The idea behind Aldebaran Resources and Eramet SA ADR 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.