Correlation Between Eramet SA and NGEx Minerals

Can any of the company-specific risk be diversified away by investing in both Eramet SA and NGEx Minerals 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 NGEx Minerals 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 NGEx Minerals, you can compare the effects of market volatilities on Eramet SA and NGEx Minerals 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 NGEx Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eramet SA and NGEx Minerals.

Diversification Opportunities for Eramet SA and NGEx Minerals

-0.6

Correlation Coefficient

Eramet SA  NGEx Minerals

Excellent diversification

The 3 months correlation between Eramet and NGEx is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Eramet SA ADR and NGEx Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGEx Minerals 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 NGEx Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGEx Minerals has no effect on the direction of Eramet SA i.e., Eramet SA and NGEx Minerals go up and down completely randomly.

Pair Corralation between Eramet SA and NGEx Minerals

Assuming the 90 days horizon Eramet SA ADR is expected to under-perform the NGEx Minerals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Eramet SA ADR is 1.37 times less risky than NGEx Minerals. The pink sheet trades about -0.01 of its potential returns per unit of risk. The NGEx Minerals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  252.00  in NGEx Minerals on October 11, 2024 and sell it today you would earn a total of  725.00  from holding NGEx Minerals or generate 287.7% return on investment over 90 days.

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

Eramet SA ADR  vs.  NGEx Minerals

Eramet SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eramet SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NGEx Minerals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NGEx Minerals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NGEx Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eramet SA and NGEx Minerals

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

The idea behind Eramet SA ADR and NGEx Minerals 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..