Correlation Between Derichebourg and Eramet SA
Can any of the company-specific risk be diversified away by investing in both Derichebourg 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 Derichebourg and Eramet SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Derichebourg and Eramet SA, you can compare the effects of market volatilities on Derichebourg 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 Derichebourg with a short position of Eramet SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Derichebourg and Eramet SA.
Diversification Opportunities for Derichebourg and Eramet SA
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Derichebourg and Eramet is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Derichebourg and Eramet SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eramet SA and Derichebourg 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 Derichebourg 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 Derichebourg i.e., Derichebourg and Eramet SA go up and down completely randomly.
Pair Corralation between Derichebourg and Eramet SA
Assuming the 90 days trading horizon Derichebourg is expected to under-perform the Eramet SA. But the stock apears to be less risky and, when comparing its historical volatility, Derichebourg is 1.1 times less risky than Eramet SA. The stock trades about -0.02 of its potential returns per unit of risk. The Eramet SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 5,490 in Eramet SA on November 2, 2024 and sell it today you would earn a total of 30.00 from holding Eramet SA or generate 0.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Derichebourg vs. Eramet SA
Performance |
| Timeline |
| Derichebourg |
| Eramet SA |
Derichebourg and Eramet SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Derichebourg and Eramet SA
The main advantage of trading using opposite Derichebourg and Eramet SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Derichebourg 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.| Derichebourg vs. Eramet SA | Derichebourg vs. Trigano SA | Derichebourg vs. Soitec SA | Derichebourg vs. Rubis SCA |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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