Correlation Between ERAMET SA and Grid Metals
Can any of the company-specific risk be diversified away by investing in both ERAMET SA and Grid Metals 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 Grid Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ERAMET SA and Grid Metals Corp, you can compare the effects of market volatilities on ERAMET SA and Grid Metals 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 Grid Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of ERAMET SA and Grid Metals.
Diversification Opportunities for ERAMET SA and Grid Metals
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between ERAMET and Grid is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding ERAMET SA and Grid Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grid Metals Corp 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 Grid Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grid Metals Corp has no effect on the direction of ERAMET SA i.e., ERAMET SA and Grid Metals go up and down completely randomly.
Pair Corralation between ERAMET SA and Grid Metals
Assuming the 90 days horizon ERAMET SA is expected to under-perform the Grid Metals. But the pink sheet apears to be less risky and, when comparing its historical volatility, ERAMET SA is 2.03 times less risky than Grid Metals. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Grid Metals Corp is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 5.85 in Grid Metals Corp on September 1, 2024 and sell it today you would lose (3.57) from holding Grid Metals Corp or give up 61.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.43% |
| Values | Daily Returns |
ERAMET SA vs. Grid Metals Corp
Performance |
| Timeline |
| ERAMET SA |
| Grid Metals Corp |
ERAMET SA and Grid Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ERAMET SA and Grid Metals
The main advantage of trading using opposite ERAMET SA and Grid Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ERAMET SA position performs unexpectedly, Grid Metals 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 Grid Metals will offset losses from the drop in Grid Metals' long position.| ERAMET SA vs. Iluka Resources Ltd | ERAMET SA vs. Giyani Metals Corp | ERAMET SA vs. IGO Limited | ERAMET SA vs. Grid Metals Corp |
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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