Correlation Between Eramet SA and Trilogy Metals

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

Diversification Opportunities for Eramet SA and Trilogy Metals

0.51

Correlation Coefficient

Eramet SA  Trilogy Metals

Very weak diversification

The 3 months correlation between Eramet and Trilogy is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Eramet SA ADR and Trilogy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trilogy 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 ADR are associated (or correlated) with Trilogy Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trilogy Metals has no effect on the direction of Eramet SA i.e., Eramet SA and Trilogy Metals go up and down completely randomly.

Pair Corralation between Eramet SA and Trilogy Metals

Assuming the 90 days horizon Eramet SA is expected to generate 2.39 times less return on investment than Trilogy Metals. But when comparing it to its historical volatility, Eramet SA ADR is 2.18 times less risky than Trilogy Metals. It trades about 0.07 of its potential returns per unit of risk. Trilogy Metals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  123.00  in Trilogy Metals on November 28, 2024 and sell it today you would earn a total of  25.00  from holding Trilogy Metals or generate 20.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Eramet SA ADR  vs.  Trilogy Metals

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 5 (%) 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.

Trilogy Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Trilogy Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Trilogy Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eramet SA and Trilogy Metals

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

The idea behind Eramet SA ADR and Trilogy Metals 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.