Correlation Between Critical Elements and European Metals

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

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

Diversification Opportunities for Critical Elements and European Metals

0.0

Correlation Coefficient

Critical Elements  European Metals

Pay attention - limited upside

The 3 months correlation between Critical and European is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Critical Elements 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 Critical Elements 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 Critical Elements 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 Critical Elements i.e., Critical Elements and European Metals go up and down completely randomly.

Pair Corralation between Critical Elements and European Metals

If you would invest  28.00  in Critical Elements on December 1, 2024 and sell it today you would earn a total of  16.00  from holding Critical Elements or generate 57.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Critical Elements  vs.  European Metals Holdings

Critical Elements

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Critical Elements are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Critical Elements reported solid returns over the last few months and may actually be approaching a breakup point.

European Metals Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days European Metals Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, European Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Critical Elements and European Metals

The main advantage of trading using opposite Critical Elements and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Critical Elements 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 Critical Elements 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.