Correlation Between Eramet SA and Etablissements Maurel

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

By analyzing existing cross correlation between Eramet SA and Etablissements Maurel et, you can compare the effects of market volatilities on Eramet SA and Etablissements Maurel 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 Etablissements Maurel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eramet SA and Etablissements Maurel.

Diversification Opportunities for Eramet SA and Etablissements Maurel

0.23

Correlation Coefficient

Eramet SA  Etablissements Maurel

Modest diversification

The 3 months correlation between Eramet and Etablissements is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Eramet SA and Etablissements Maurel et in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etablissements Maurel 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 Etablissements Maurel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etablissements Maurel has no effect on the direction of Eramet SA i.e., Eramet SA and Etablissements Maurel go up and down completely randomly.

Pair Corralation between Eramet SA and Etablissements Maurel

Assuming the 90 days trading horizon Eramet SA is expected to under-perform the Etablissements Maurel. In addition to that, Eramet SA is 1.8 times more volatile than Etablissements Maurel et. It trades about -0.14 of its total potential returns per unit of risk. Etablissements Maurel et is currently generating about -0.03 per unit of volatility. If you would invest  518.00  in Etablissements Maurel et on August 31, 2024 and sell it today you would lose (21.00) from holding Etablissements Maurel et or give up 4.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Eramet SA  vs.  Etablissements Maurel et

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Etablissements Maurel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Etablissements Maurel et has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Etablissements Maurel 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 Etablissements Maurel

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

The idea behind Eramet SA and Etablissements Maurel et 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.