Correlation Between Advtech and Europa Metals

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

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

Diversification Opportunities for Advtech and Europa Metals

-0.49

Correlation Coefficient

Advtech  Europa Metals

Very good diversification

The 3 months correlation between Advtech and Europa is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Advtech and Europa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europa Metals and Advtech 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 Advtech are associated (or correlated) with Europa Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europa Metals has no effect on the direction of Advtech i.e., Advtech and Europa Metals go up and down completely randomly.

Pair Corralation between Advtech and Europa Metals

Assuming the 90 days trading horizon Advtech is expected to generate 0.08 times more return on investment than Europa Metals. However, Advtech is 11.92 times less risky than Europa Metals. It trades about 0.11 of its potential returns per unit of risk. Europa Metals is currently generating about 0.0 per unit of risk. If you would invest  313,600  in Advtech on October 25, 2024 and sell it today you would earn a total of  23,900  from holding Advtech or generate 7.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Advtech  vs.  Europa Metals

Advtech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advtech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Advtech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Europa Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Europa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Europa Metals is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Advtech and Europa Metals

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

The idea behind Advtech and Europa Metals 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.