Correlation Between Ekinops SA and Eramet SA

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

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

Diversification Opportunities for Ekinops SA and Eramet SA

-0.33

Correlation Coefficient

Ekinops SA  Eramet SA

Very good diversification

The 3 months correlation between Ekinops and Eramet is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ekinops SA and Eramet SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eramet SA and Ekinops 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 Ekinops SA 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 Ekinops SA i.e., Ekinops SA and Eramet SA go up and down completely randomly.

Pair Corralation between Ekinops SA and Eramet SA

Assuming the 90 days trading horizon Ekinops SA is expected to under-perform the Eramet SA. But the stock apears to be less risky and, when comparing its historical volatility, Ekinops SA is 2.75 times less risky than Eramet SA. The stock trades about -0.07 of its potential returns per unit of risk. The Eramet SA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,410  in Eramet SA on November 29, 2024 and sell it today you would lose (60.00) from holding Eramet SA or give up 1.11% of portfolio value over 90 days.

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

Ekinops SA  vs.  Eramet SA

Ekinops SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ekinops SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 Ekinops SA and Eramet SA

The main advantage of trading using opposite Ekinops SA and Eramet SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ekinops SA 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 Ekinops SA 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.