Correlation Between Aubay Socit and Eramet SA

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

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

Diversification Opportunities for Aubay Socit and Eramet SA

0.39

Correlation Coefficient

Aubay Socit  Eramet SA

Weak diversification

The 3 months correlation between Aubay and Eramet is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Aubay Socit Anonyme and Eramet SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eramet SA and Aubay Socit 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 Aubay Socit Anonyme 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 has no effect on the direction of Aubay Socit i.e., Aubay Socit and Eramet SA go up and down completely randomly.

Pair Corralation between Aubay Socit and Eramet SA

Assuming the 90 days trading horizon Aubay Socit Anonyme is expected to generate 0.39 times more return on investment than Eramet SA. However, Aubay Socit Anonyme is 2.55 times less risky than Eramet SA. It trades about 0.06 of its potential returns per unit of risk. Eramet SA is currently generating about -0.01 per unit of risk. If you would invest  4,390  in Aubay Socit Anonyme on November 29, 2024 and sell it today you would earn a total of  55.00  from holding Aubay Socit Anonyme or generate 1.25% return on investment over 90 days.

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

Aubay Socit Anonyme  vs.  Eramet SA

Aubay Socit Anonyme

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aubay Socit Anonyme has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Aubay Socit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eramet SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eramet SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eramet SA may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Aubay Socit and Eramet SA

The main advantage of trading using opposite Aubay Socit and Eramet SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aubay Socit 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 Aubay Socit Anonyme and Eramet SA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.