Correlation Between Eramet SA and Eminent Gold

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

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

Diversification Opportunities for Eramet SA and Eminent Gold

-0.23

Correlation Coefficient

Eramet SA  Eminent Gold

Very good diversification

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

Pair Corralation between Eramet SA and Eminent Gold

Assuming the 90 days horizon Eramet SA ADR is expected to under-perform the Eminent Gold. But the pink sheet apears to be less risky and, when comparing its historical volatility, Eramet SA ADR is 1.24 times less risky than Eminent Gold. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Eminent Gold Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Eminent Gold Corp on September 13, 2024 and sell it today you would earn a total of  3.00  from holding Eminent Gold Corp or generate 13.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Eramet SA ADR  vs.  Eminent Gold Corp

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 latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Eminent Gold Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eminent Gold Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Eminent Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eramet SA and Eminent Gold

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

The idea behind Eramet SA ADR and Eminent Gold 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.