Correlation Between Eramet SA and Derichebourg
Can any of the company-specific risk be diversified away by investing in both Eramet SA and Derichebourg 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 Eramet SA and Derichebourg into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eramet SA and Derichebourg, you can compare the effects of market volatilities on Eramet SA and Derichebourg 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 Eramet SA with a short position of Derichebourg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eramet SA and Derichebourg.
Diversification Opportunities for Eramet SA and Derichebourg
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eramet and Derichebourg is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Eramet SA and Derichebourg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Derichebourg and Eramet SA 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 Eramet SA are associated (or correlated) with Derichebourg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Derichebourg has no effect on the direction of Eramet SA i.e., Eramet SA and Derichebourg go up and down completely randomly.
Pair Corralation between Eramet SA and Derichebourg
Assuming the 90 days trading horizon Eramet SA is expected to generate 1.9 times less return on investment than Derichebourg. In addition to that, Eramet SA is 1.83 times more volatile than Derichebourg. It trades about 0.07 of its total potential returns per unit of risk. Derichebourg is currently generating about 0.23 per unit of volatility. If you would invest 522.00 in Derichebourg on December 11, 2024 and sell it today you would earn a total of 59.00 from holding Derichebourg or generate 11.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eramet SA vs. Derichebourg
Performance |
| Timeline |
| Eramet SA |
| Derichebourg |
Eramet SA and Derichebourg Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eramet SA and Derichebourg
The main advantage of trading using opposite Eramet SA and Derichebourg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eramet SA position performs unexpectedly, Derichebourg 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 Derichebourg will offset losses from the drop in Derichebourg's long position.The idea behind Eramet SA and Derichebourg 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.| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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