Correlation Between NGEx Minerals and Eramet SA

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

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

Diversification Opportunities for NGEx Minerals and Eramet SA

-0.6

Correlation Coefficient

NGEx Minerals  Eramet SA

Excellent diversification

The 3 months correlation between NGEx and Eramet is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding NGEx Minerals 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 NGEx Minerals 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 NGEx Minerals 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 NGEx Minerals i.e., NGEx Minerals and Eramet SA go up and down completely randomly.

Pair Corralation between NGEx Minerals and Eramet SA

Assuming the 90 days horizon NGEx Minerals is expected to generate 0.58 times more return on investment than Eramet SA. However, NGEx Minerals is 1.73 times less risky than Eramet SA. It trades about 0.18 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  741.00  in NGEx Minerals on September 12, 2024 and sell it today you would earn a total of  185.00  from holding NGEx Minerals or generate 24.97% return on investment over 90 days.

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

NGEx Minerals  vs.  Eramet SA ADR

NGEx Minerals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NGEx Minerals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NGEx Minerals 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 NGEx Minerals and Eramet SA

The main advantage of trading using opposite NGEx Minerals and Eramet SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NGEx Minerals 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 NGEx Minerals 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 Global Correlations module to find global opportunities by holding instruments from different markets.