Correlation Between European Metals and Alliance Data

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

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

Diversification Opportunities for European Metals and Alliance Data

-0.35

Correlation Coefficient

European Metals  Alliance Data

Very good diversification

The 3 months correlation between European and Alliance is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Alliance Data Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Data Systems and European 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 European Metals Holdings are associated (or correlated) with Alliance Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Data Systems has no effect on the direction of European Metals i.e., European Metals and Alliance Data go up and down completely randomly.

Pair Corralation between European Metals and Alliance Data

Assuming the 90 days trading horizon European Metals Holdings is expected to generate 6.93 times more return on investment than Alliance Data. However, European Metals is 6.93 times more volatile than Alliance Data Systems. It trades about 0.1 of its potential returns per unit of risk. Alliance Data Systems is currently generating about -0.1 per unit of risk. If you would invest  725.00  in European Metals Holdings on December 30, 2024 and sell it today you would earn a total of  525.00  from holding European Metals Holdings or generate 72.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.31%
Values	Daily Returns

European Metals Holdings  vs.  Alliance Data Systems

European Metals Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in European Metals Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, European Metals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Alliance Data Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alliance Data Systems 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 basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with European Metals and Alliance Data

The main advantage of trading using opposite European Metals and Alliance Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals position performs unexpectedly, Alliance Data 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 Alliance Data will offset losses from the drop in Alliance Data's long position.

The idea behind European Metals Holdings and Alliance Data Systems 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.