Correlation Between Empire Metals and EasyJet PLC
Can any of the company-specific risk be diversified away by investing in both Empire Metals and EasyJet PLC 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 Empire Metals and EasyJet PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Empire Metals Limited and EasyJet PLC, you can compare the effects of market volatilities on Empire Metals and EasyJet PLC 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 Empire Metals with a short position of EasyJet PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Metals and EasyJet PLC.
Diversification Opportunities for Empire Metals and EasyJet PLC
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Empire and EasyJet is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Limited and EasyJet PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EasyJet PLC and Empire Metals 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 Empire Metals Limited are associated (or correlated) with EasyJet PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EasyJet PLC has no effect on the direction of Empire Metals i.e., Empire Metals and EasyJet PLC go up and down completely randomly.
Pair Corralation between Empire Metals and EasyJet PLC
Assuming the 90 days trading horizon Empire Metals Limited is expected to generate 2.92 times more return on investment than EasyJet PLC. However, Empire Metals is 2.92 times more volatile than EasyJet PLC. It trades about 0.12 of its potential returns per unit of risk. EasyJet PLC is currently generating about 0.34 per unit of risk. If you would invest 605.00 in Empire Metals Limited on September 23, 2024 and sell it today you would earn a total of 55.00 from holding Empire Metals Limited or generate 9.09% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Empire Metals Limited vs. EasyJet PLC
Performance |
Timeline |
Empire Metals Limited |
EasyJet PLC |
Empire Metals and EasyJet PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Empire Metals and EasyJet PLC
The main advantage of trading using opposite Empire Metals and EasyJet PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire Metals position performs unexpectedly, EasyJet PLC 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 EasyJet PLC will offset losses from the drop in EasyJet PLC's long position.Empire Metals vs. Associated British Foods | Empire Metals vs. Bell Food Group | Empire Metals vs. XLMedia PLC | Empire Metals vs. G5 Entertainment AB |
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Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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