Correlation Between Eramet SA and Murchison Minerals

Can any of the company-specific risk be diversified away by investing in both Eramet SA and Murchison Minerals 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 Murchison Minerals 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 Murchison Minerals, you can compare the effects of market volatilities on Eramet SA and Murchison Minerals 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 Murchison Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eramet SA and Murchison Minerals.

Diversification Opportunities for Eramet SA and Murchison Minerals

0.32

Correlation Coefficient

Eramet SA  Murchison Minerals

Weak diversification

The 3 months correlation between Eramet and Murchison is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Eramet SA ADR and Murchison Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murchison Minerals 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 Murchison Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murchison Minerals has no effect on the direction of Eramet SA i.e., Eramet SA and Murchison Minerals go up and down completely randomly.

Pair Corralation between Eramet SA and Murchison Minerals

Assuming the 90 days horizon Eramet SA ADR is expected to under-perform the Murchison Minerals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Eramet SA ADR is 2.19 times less risky than Murchison Minerals. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Murchison Minerals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1.26  in Murchison Minerals on September 12, 2024 and sell it today you would lose (0.11) from holding Murchison Minerals or give up 8.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Eramet SA ADR  vs.  Murchison Minerals

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.

Murchison Minerals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Murchison Minerals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Murchison Minerals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eramet SA and Murchison Minerals

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

The idea behind Eramet SA ADR and Murchison Minerals 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.