Correlation Between St Galler and European Metals

Can any of the company-specific risk be diversified away by investing in both St Galler and European 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 St Galler and European Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between St Galler Kantonalbank and European Metals Holdings, you can compare the effects of market volatilities on St Galler and European 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 St Galler with a short position of European Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of St Galler and European Metals.

Diversification Opportunities for St Galler and European Metals

0.17

Correlation Coefficient

St Galler  European Metals

Average diversification

The 3 months correlation between 0QQZ and European is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding St Galler Kantonalbank and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings and St Galler 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 St Galler Kantonalbank are associated (or correlated) with European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of St Galler i.e., St Galler and European Metals go up and down completely randomly.

Pair Corralation between St Galler and European Metals

Assuming the 90 days trading horizon St Galler is expected to generate 2.68 times less return on investment than European Metals. But when comparing it to its historical volatility, St Galler Kantonalbank is 7.91 times less risky than European Metals. It trades about 0.23 of its potential returns per unit of risk. European Metals Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  725.00  in European Metals Holdings on December 25, 2024 and sell it today you would earn a total of  138.00  from holding European Metals Holdings or generate 19.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

St Galler Kantonalbank  vs.  European Metals Holdings

St Galler Kantonalbank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in St Galler Kantonalbank are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, St Galler may actually be approaching a critical reversion point that can send shares even higher in April 2025.

European Metals Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in European Metals Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, European Metals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with St Galler and European Metals

The main advantage of trading using opposite St Galler and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if St Galler position performs unexpectedly, European 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 European Metals will offset losses from the drop in European Metals' long position.

The idea behind St Galler Kantonalbank and European Metals Holdings 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.