Correlation Between Eramet SA and Esso SAF
Can any of the company-specific risk be diversified away by investing in both Eramet SA and Esso SAF 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 Esso SAF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eramet SA and Esso SAF, you can compare the effects of market volatilities on Eramet SA and Esso SAF 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 Esso SAF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eramet SA and Esso SAF.
Diversification Opportunities for Eramet SA and Esso SAF
Very weak diversification
The 3 months correlation between Eramet and Esso is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Eramet SA and Esso SAF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esso SAF 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 Esso SAF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esso SAF has no effect on the direction of Eramet SA i.e., Eramet SA and Esso SAF go up and down completely randomly.
Pair Corralation between Eramet SA and Esso SAF
Assuming the 90 days trading horizon Eramet SA is expected to generate 1.52 times more return on investment than Esso SAF. However, Eramet SA is 1.52 times more volatile than Esso SAF. It trades about -0.08 of its potential returns per unit of risk. Esso SAF is currently generating about -0.25 per unit of risk. If you would invest 5,635 in Eramet SA on November 7, 2024 and sell it today you would lose (205.00) from holding Eramet SA or give up 3.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Eramet SA vs. Esso SAF
Performance |
| Timeline |
| Eramet SA |
| Esso SAF |
Eramet SA and Esso SAF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eramet SA and Esso SAF
The main advantage of trading using opposite Eramet SA and Esso SAF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eramet SA position performs unexpectedly, Esso SAF 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 Esso SAF will offset losses from the drop in Esso SAF's long position.The idea behind Eramet SA and Esso SAF 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.| Esso SAF vs. Etablissements Maurel et | Esso SAF vs. Eramet SA | Esso SAF vs. Socit BIC SA | Esso SAF vs. TotalEnergies EP Gabon |
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 Stocks Directory module to find actively traded stocks across global markets.
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