Correlation Between Sun Summit and Eramet SA

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

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

Diversification Opportunities for Sun Summit and Eramet SA

-0.22

Correlation Coefficient

Sun Summit  Eramet SA

Very good diversification

The 3 months correlation between Sun and Eramet is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Sun Summit Minerals 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 Sun Summit 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 Sun Summit Minerals 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 Sun Summit i.e., Sun Summit and Eramet SA go up and down completely randomly.

Pair Corralation between Sun Summit and Eramet SA

Assuming the 90 days horizon Sun Summit is expected to generate 1.61 times less return on investment than Eramet SA. In addition to that, Sun Summit is 2.28 times more volatile than Eramet SA ADR. It trades about 0.02 of its total potential returns per unit of risk. Eramet SA ADR is currently generating about 0.06 per unit of volatility. If you would invest  549.00  in Eramet SA ADR on December 28, 2024 and sell it today you would earn a total of  48.00  from holding Eramet SA ADR or generate 8.74% return on investment over 90 days.

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

Sun Summit Minerals  vs.  Eramet SA ADR

Sun Summit Minerals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Summit Minerals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Sun Summit may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 4 (%) 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 Sun Summit and Eramet SA

The main advantage of trading using opposite Sun Summit and Eramet SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Summit 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 Sun Summit Minerals 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.