Correlation Between ERAMET SA and Nickel Mines

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

By analyzing existing cross correlation between ERAMET SA and Nickel Mines Limited, you can compare the effects of market volatilities on ERAMET SA and Nickel Mines 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 Nickel Mines. Check out your portfolio center. Please also check ongoing floating volatility patterns of ERAMET SA and Nickel Mines.

Diversification Opportunities for ERAMET SA and Nickel Mines

-0.42

Correlation Coefficient

ERAMET SA  Nickel Mines

Very good diversification

The 3 months correlation between ERAMET and Nickel is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding ERAMET SA and Nickel Mines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nickel Mines Limited 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 Nickel Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nickel Mines Limited has no effect on the direction of ERAMET SA i.e., ERAMET SA and Nickel Mines go up and down completely randomly.

Pair Corralation between ERAMET SA and Nickel Mines

Assuming the 90 days horizon ERAMET SA is expected to under-perform the Nickel Mines. But the pink sheet apears to be less risky and, when comparing its historical volatility, ERAMET SA is 1.06 times less risky than Nickel Mines. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Nickel Mines Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  46.00  in Nickel Mines Limited on September 4, 2024 and sell it today you would earn a total of  9.00  from holding Nickel Mines Limited or generate 19.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	53.36%
Values	Daily Returns

ERAMET SA  vs.  Nickel Mines Limited

ERAMET SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ERAMET SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Nickel Mines Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nickel Mines Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Nickel Mines may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ERAMET SA and Nickel Mines

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

The idea behind ERAMET SA and Nickel Mines Limited 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.