Correlation Between Ivanhoe Mines and Eramet SA

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

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

Diversification Opportunities for Ivanhoe Mines and Eramet SA

-0.51

Correlation Coefficient

Ivanhoe Mines  Eramet SA

Excellent diversification

The 3 months correlation between Ivanhoe and Eramet is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Mines 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 Ivanhoe Mines 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 Ivanhoe Mines 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 Ivanhoe Mines i.e., Ivanhoe Mines and Eramet SA go up and down completely randomly.

Pair Corralation between Ivanhoe Mines and Eramet SA

Assuming the 90 days horizon Ivanhoe Mines is expected to under-perform the Eramet SA. In addition to that, Ivanhoe Mines is 1.18 times more volatile than Eramet SA ADR. It trades about -0.16 of its total potential returns per unit of risk. Eramet SA ADR is currently generating about 0.08 per unit of volatility. 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

Ivanhoe Mines  vs.  Eramet SA ADR

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.

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.

Pair Trading with Ivanhoe Mines and Eramet SA

The main advantage of trading using opposite Ivanhoe Mines and Eramet SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ivanhoe Mines 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 Ivanhoe Mines 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.