Correlation Between Copper 360 and Europa Metals

Can any of the company-specific risk be diversified away by investing in both Copper 360 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 Copper 360 and Europa Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Copper 360 and Europa Metals, you can compare the effects of market volatilities on Copper 360 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 Copper 360 with a short position of Europa Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Copper 360 and Europa Metals.

Diversification Opportunities for Copper 360 and Europa Metals

0.73

Correlation Coefficient

Copper 360  Europa Metals

Poor diversification

The 3 months correlation between Copper and Europa is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Copper 360 and Europa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europa Metals and Copper 360 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 Copper 360 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 Copper 360 i.e., Copper 360 and Europa Metals go up and down completely randomly.

Pair Corralation between Copper 360 and Europa Metals

Assuming the 90 days trading horizon Copper 360 is expected to under-perform the Europa Metals. But the stock apears to be less risky and, when comparing its historical volatility, Copper 360 is 2.47 times less risky than Europa Metals. The stock trades about -0.04 of its potential returns per unit of risk. The Europa Metals is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,500  in Europa Metals on December 22, 2024 and sell it today you would lose (500.00) from holding Europa Metals or give up 14.29% of portfolio value over 90 days.

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

Copper 360  vs.  Europa Metals

Copper 360

Risk-Adjusted Performance

Very Weak

Over the last 90 days Copper 360 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains 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 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 Copper 360 and Europa Metals

The main advantage of trading using opposite Copper 360 and Europa Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copper 360 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 Copper 360 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.