Correlation Between Azarga Metals and Eramet SA

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

By analyzing existing cross correlation between Azarga Metals Corp and Eramet SA ADR, you can compare the effects of market volatilities on Azarga Metals and Eramet SA 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 Azarga Metals with a short position of Eramet SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azarga Metals and Eramet SA.

Diversification Opportunities for Azarga Metals and Eramet SA

0.01

Correlation Coefficient

Azarga Metals  Eramet SA

Significant diversification

The 3 months correlation between Azarga and Eramet is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Azarga Metals Corp and Eramet SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eramet SA ADR and Azarga Metals 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 Azarga Metals Corp are associated (or correlated) with Eramet SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eramet SA ADR has no effect on the direction of Azarga Metals i.e., Azarga Metals and Eramet SA go up and down completely randomly.

Pair Corralation between Azarga Metals and Eramet SA

Assuming the 90 days horizon Azarga Metals Corp is expected to generate 2.28 times more return on investment than Eramet SA. However, Azarga Metals is 2.28 times more volatile than Eramet SA ADR. It trades about 0.07 of its potential returns per unit of risk. Eramet SA ADR is currently generating about 0.04 per unit of risk. If you would invest  1.56  in Azarga Metals Corp on December 29, 2024 and sell it today you would earn a total of  0.34  from holding Azarga Metals Corp or generate 21.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Azarga Metals Corp  vs.  Eramet SA ADR

Azarga Metals Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Azarga Metals Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Azarga Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Eramet SA ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eramet SA ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Eramet SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Azarga Metals and Eramet SA

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

The idea behind Azarga Metals Corp and Eramet SA ADR 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.