Correlation Between Eramet SA and Western Copper
Can any of the company-specific risk be diversified away by investing in both Eramet SA and Western Copper 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 Western Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eramet SA ADR and Western Copper and, you can compare the effects of market volatilities on Eramet SA and Western Copper 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 Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eramet SA and Western Copper.
Diversification Opportunities for Eramet SA and Western Copper
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eramet and Western is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Eramet SA ADR and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 ADR are associated (or correlated) with Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Eramet SA i.e., Eramet SA and Western Copper go up and down completely randomly.
Pair Corralation between Eramet SA and Western Copper
Assuming the 90 days horizon Eramet SA ADR is expected to under-perform the Western Copper. But the pink sheet apears to be less risky and, when comparing its historical volatility, Eramet SA ADR is 1.19 times less risky than Western Copper. The pink sheet trades about -0.25 of its potential returns per unit of risk. The Western Copper and is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 110.00 in Western Copper and on September 3, 2024 and sell it today you would earn a total of 1.00 from holding Western Copper and or generate 0.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eramet SA ADR vs. Western Copper and
Performance |
| Timeline |
| Eramet SA ADR |
| Western Copper |
Eramet SA and Western Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eramet SA and Western Copper
The main advantage of trading using opposite Eramet SA and Western Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eramet SA position performs unexpectedly, Western Copper 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 Western Copper will offset losses from the drop in Western Copper's long position.| Eramet SA vs. Qubec Nickel Corp | Eramet SA vs. IGO Limited | Eramet SA vs. Avarone Metals | Eramet SA vs. Adriatic Metals PLC |
| Western Copper vs. Fury Gold Mines | Western Copper vs. EMX Royalty Corp | Western Copper vs. Nevada King Gold | Western Copper vs. Aftermath Silver |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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