Correlation Between Eramet SA and Aubay Socit

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

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

Diversification Opportunities for Eramet SA and Aubay Socit

0.39

Correlation Coefficient

Eramet SA  Aubay Socit

Weak diversification

The 3 months correlation between Eramet and Aubay is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Eramet SA and Aubay Socit Anonyme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aubay Socit Anonyme 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 are associated (or correlated) with Aubay Socit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aubay Socit Anonyme has no effect on the direction of Eramet SA i.e., Eramet SA and Aubay Socit go up and down completely randomly.

Pair Corralation between Eramet SA and Aubay Socit

Assuming the 90 days trading horizon Eramet SA is expected to generate 1.77 times more return on investment than Aubay Socit. However, Eramet SA is 1.77 times more volatile than Aubay Socit Anonyme. It trades about 0.05 of its potential returns per unit of risk. Aubay Socit Anonyme is currently generating about -0.01 per unit of risk. If you would invest  5,065  in Eramet SA on November 29, 2024 and sell it today you would earn a total of  285.00  from holding Eramet SA or generate 5.63% return on investment over 90 days.

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

Eramet SA  vs.  Aubay Socit Anonyme

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.

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.

Pair Trading with Eramet SA and Aubay Socit

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

The idea behind Eramet SA and Aubay Socit Anonyme 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.