Correlation Between Seche Environnement and Neometals

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

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

Diversification Opportunities for Seche Environnement and Neometals

-0.37

Correlation Coefficient

Seche Environnement  Neometals

Very good diversification

The 3 months correlation between Seche and Neometals is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Seche Environnement SA and Neometals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neometals and Seche Environnement 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 Seche Environnement SA are associated (or correlated) with Neometals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neometals has no effect on the direction of Seche Environnement i.e., Seche Environnement and Neometals go up and down completely randomly.

Pair Corralation between Seche Environnement and Neometals

Assuming the 90 days trading horizon Seche Environnement SA is expected to generate 0.27 times more return on investment than Neometals. However, Seche Environnement SA is 3.7 times less risky than Neometals. It trades about 0.05 of its potential returns per unit of risk. Neometals is currently generating about -0.05 per unit of risk. If you would invest  8,200  in Seche Environnement SA on November 29, 2024 and sell it today you would earn a total of  450.00  from holding Seche Environnement SA or generate 5.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	72.13%
Values	Daily Returns

Seche Environnement SA  vs.  Neometals

Seche Environnement

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Seche Environnement SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Seche Environnement may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Neometals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Neometals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Seche Environnement and Neometals

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

The idea behind Seche Environnement SA and Neometals 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.