Correlation Between ERAMET SA and Hannan Metals
Can any of the company-specific risk be diversified away by investing in both ERAMET SA and Hannan Metals 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 Hannan Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ERAMET SA and Hannan Metals, you can compare the effects of market volatilities on ERAMET SA and Hannan Metals 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 Hannan Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of ERAMET SA and Hannan Metals.
Diversification Opportunities for ERAMET SA and Hannan Metals
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between ERAMET and Hannan is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding ERAMET SA and Hannan Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannan Metals 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 Hannan Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannan Metals has no effect on the direction of ERAMET SA i.e., ERAMET SA and Hannan Metals go up and down completely randomly.
Pair Corralation between ERAMET SA and Hannan Metals
Assuming the 90 days horizon ERAMET SA is expected to generate 55.48 times less return on investment than Hannan Metals. But when comparing it to its historical volatility, ERAMET SA is 19.6 times less risky than Hannan Metals. It trades about 0.08 of its potential returns per unit of risk. Hannan Metals is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 51.00 in Hannan Metals on November 21, 2024 and sell it today you would earn a total of 21.00 from holding Hannan Metals or generate 41.18% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
ERAMET SA vs. Hannan Metals
Performance |
Timeline |
ERAMET SA |
Hannan Metals |
ERAMET SA and Hannan Metals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ERAMET SA and Hannan Metals
The main advantage of trading using opposite ERAMET SA and Hannan Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ERAMET SA position performs unexpectedly, Hannan Metals 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 Hannan Metals will offset losses from the drop in Hannan Metals' long position.ERAMET SA vs. Iluka Resources Ltd | ||
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Check out your portfolio center.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.
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