Correlation Between Intel and ERAMET SA

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

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

Diversification Opportunities for Intel and ERAMET SA

-0.82

Correlation Coefficient

Intel  ERAMET SA

Pay attention - limited upside

The 3 months correlation between Intel and ERAMET is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Intel and ERAMET SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ERAMET SA and Intel 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 Intel 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 has no effect on the direction of Intel i.e., Intel and ERAMET SA go up and down completely randomly.

Pair Corralation between Intel and ERAMET SA

Given the investment horizon of 90 days Intel is expected to generate 1.0 times more return on investment than ERAMET SA. However, Intel is 1.0 times more volatile than ERAMET SA. It trades about 0.17 of its potential returns per unit of risk. ERAMET SA is currently generating about -0.08 per unit of risk. If you would invest  2,152  in Intel on September 1, 2024 and sell it today you would earn a total of  253.00  from holding Intel or generate 11.76% return on investment over 90 days.

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

Intel  vs.  ERAMET SA

Intel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Intel exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Intel and ERAMET SA

The main advantage of trading using opposite Intel and ERAMET SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel 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 Intel and ERAMET SA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.