Correlation Between Eramet SA and Caisse Regionale

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

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

Diversification Opportunities for Eramet SA and Caisse Regionale

-0.64

Correlation Coefficient

Eramet SA  Caisse Regionale

Excellent diversification

The 3 months correlation between Eramet and Caisse is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Eramet SA and Caisse Regionale de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caisse Regionale and Eramet SA 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 Eramet SA are associated (or correlated) with Caisse Regionale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caisse Regionale has no effect on the direction of Eramet SA i.e., Eramet SA and Caisse Regionale go up and down completely randomly.

Pair Corralation between Eramet SA and Caisse Regionale

Assuming the 90 days trading horizon Eramet SA is expected to under-perform the Caisse Regionale. In addition to that, Eramet SA is 3.6 times more volatile than Caisse Regionale de. It trades about -0.12 of its total potential returns per unit of risk. Caisse Regionale de is currently generating about 0.1 per unit of volatility. If you would invest  5,499  in Caisse Regionale de on September 3, 2024 and sell it today you would earn a total of  301.00  from holding Caisse Regionale de or generate 5.47% return on investment over 90 days.

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

Eramet SA  vs.  Caisse Regionale de

Eramet SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eramet SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat 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.

Caisse Regionale

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caisse Regionale de are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Caisse Regionale is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eramet SA and Caisse Regionale

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

The idea behind Eramet SA and Caisse Regionale de 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.