Correlation Between Canada Rare and Eramet SA
Can any of the company-specific risk be diversified away by investing in both Canada Rare 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 Canada Rare and Eramet SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canada Rare Earth and Eramet SA ADR, you can compare the effects of market volatilities on Canada Rare 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 Canada Rare with a short position of Eramet SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canada Rare and Eramet SA.
Diversification Opportunities for Canada Rare and Eramet SA
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Canada and Eramet is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Canada Rare Earth 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 Canada Rare 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 Canada Rare Earth 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 Canada Rare i.e., Canada Rare and Eramet SA go up and down completely randomly.
Pair Corralation between Canada Rare and Eramet SA
Assuming the 90 days horizon Canada Rare Earth is expected to under-perform the Eramet SA. In addition to that, Canada Rare is 4.7 times more volatile than Eramet SA ADR. It trades about -0.24 of its total potential returns per unit of risk. Eramet SA ADR is currently generating about 0.13 per unit of volatility. If you would invest 535.00 in Eramet SA ADR on October 25, 2024 and sell it today you would earn a total of 30.00 from holding Eramet SA ADR or generate 5.61% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 94.74% |
Values | Daily Returns |
Canada Rare Earth vs. Eramet SA ADR
Performance |
Timeline |
Canada Rare Earth |
Eramet SA ADR |
Canada Rare and Eramet SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Canada Rare and Eramet SA
The main advantage of trading using opposite Canada Rare and Eramet SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canada Rare 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.Canada Rare vs. Commerce Resources Corp | Canada Rare vs. Medallion Resources | Canada Rare vs. Ucore Rare Metals | Canada Rare vs. Bravada Gold |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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