Correlation Between Mineral Resources and ERAMET SA

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

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

Diversification Opportunities for Mineral Resources and ERAMET SA

-0.07

Correlation Coefficient

Mineral Resources  ERAMET SA

Good diversification

The 3 months correlation between Mineral and ERAMET is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Mineral Resources Limited and ERAMET SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ERAMET SA and Mineral Resources 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 Mineral Resources Limited 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 Mineral Resources i.e., Mineral Resources and ERAMET SA go up and down completely randomly.

Pair Corralation between Mineral Resources and ERAMET SA

Assuming the 90 days horizon Mineral Resources Limited is expected to under-perform the ERAMET SA. In addition to that, Mineral Resources is 16.1 times more volatile than ERAMET SA. It trades about -0.09 of its total potential returns per unit of risk. ERAMET SA is currently generating about 0.04 per unit of volatility. If you would invest  5,697  in ERAMET SA on December 29, 2024 and sell it today you would earn a total of  32.00  from holding ERAMET SA or generate 0.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Mineral Resources Limited  vs.  ERAMET SA

Mineral Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mineral Resources Limited 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

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ERAMET SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ERAMET SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mineral Resources and ERAMET SA

The main advantage of trading using opposite Mineral Resources and ERAMET SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mineral Resources 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 Mineral Resources Limited 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.