Correlation Between Eramet SA and Ivanhoe Mines

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

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

Diversification Opportunities for Eramet SA and Ivanhoe Mines

-0.4

Correlation Coefficient

Eramet SA  Ivanhoe Mines

Very good diversification

The 3 months correlation between Eramet and Ivanhoe is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Eramet SA ADR and Ivanhoe Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivanhoe Mines 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 ADR are associated (or correlated) with Ivanhoe Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivanhoe Mines has no effect on the direction of Eramet SA i.e., Eramet SA and Ivanhoe Mines go up and down completely randomly.

Pair Corralation between Eramet SA and Ivanhoe Mines

Assuming the 90 days horizon Eramet SA ADR is expected to generate 0.85 times more return on investment than Ivanhoe Mines. However, Eramet SA ADR is 1.18 times less risky than Ivanhoe Mines. It trades about 0.08 of its potential returns per unit of risk. Ivanhoe Mines is currently generating about -0.16 per unit of risk. If you would invest  512.00  in Eramet SA ADR on December 2, 2024 and sell it today you would earn a total of  58.00  from holding Eramet SA ADR or generate 11.33% return on investment over 90 days.

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

Eramet SA ADR  vs.  Ivanhoe Mines

Eramet SA ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eramet SA ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Eramet SA showed solid returns over the last few months and may actually be approaching a breakup point.

Ivanhoe Mines

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Eramet SA and Ivanhoe Mines

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

The idea behind Eramet SA ADR and Ivanhoe Mines 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.