Correlation Between CAP LEASE and Europa Metals

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

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

Diversification Opportunities for CAP LEASE and Europa Metals

0.4

Correlation Coefficient

CAP LEASE  Europa Metals

Very weak diversification

The 3 months correlation between CAP and Europa is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding CAP LEASE AVIATION and Europa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europa Metals and CAP LEASE 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 CAP LEASE AVIATION 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 CAP LEASE i.e., CAP LEASE and Europa Metals go up and down completely randomly.

Pair Corralation between CAP LEASE and Europa Metals

Assuming the 90 days trading horizon CAP LEASE AVIATION is expected to generate 0.65 times more return on investment than Europa Metals. However, CAP LEASE AVIATION is 1.55 times less risky than Europa Metals. It trades about -0.09 of its potential returns per unit of risk. Europa Metals is currently generating about -0.09 per unit of risk. If you would invest  50.00  in CAP LEASE AVIATION on December 29, 2024 and sell it today you would lose (12.00) from holding CAP LEASE AVIATION or give up 24.0% of portfolio value over 90 days.

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

CAP LEASE AVIATION  vs.  Europa Metals

CAP LEASE AVIATION

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAP LEASE AVIATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Europa Metals

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with CAP LEASE and Europa Metals

The main advantage of trading using opposite CAP LEASE and Europa Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAP LEASE 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 CAP LEASE AVIATION 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.