Correlation Between Eco Animal and European Metals

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

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

Diversification Opportunities for Eco Animal and European Metals

0.08

Correlation Coefficient

Eco Animal  European Metals

Significant diversification

The 3 months correlation between Eco and European is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Eco Animal Health 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 Eco Animal 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 Eco Animal Health 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 Eco Animal i.e., Eco Animal and European Metals go up and down completely randomly.

Pair Corralation between Eco Animal and European Metals

Assuming the 90 days trading horizon Eco Animal Health is expected to generate 0.61 times more return on investment than European Metals. However, Eco Animal Health is 1.63 times less risky than European Metals. It trades about -0.04 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.1 per unit of risk. If you would invest  11,000  in Eco Animal Health on October 5, 2024 and sell it today you would lose (3,900) from holding Eco Animal Health or give up 35.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.68%
Values	Daily Returns

Eco Animal Health  vs.  European Metals Holdings

Eco Animal Health

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eco Animal Health are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Eco Animal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

European Metals Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Metals Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Pair Trading with Eco Animal and European Metals

The main advantage of trading using opposite Eco Animal and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eco Animal 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 Eco Animal Health 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..