Correlation Between European Metals and Adriatic Metals

Can any of the company-specific risk be diversified away by investing in both European Metals and Adriatic 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 European Metals and Adriatic Metals 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 Adriatic Metals, you can compare the effects of market volatilities on European Metals and Adriatic 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 European Metals with a short position of Adriatic Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Adriatic Metals.

Diversification Opportunities for European Metals and Adriatic Metals

0.27

Correlation Coefficient

European Metals  Adriatic Metals

Modest diversification

The 3 months correlation between European and Adriatic is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Adriatic Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriatic Metals 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 Adriatic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriatic Metals has no effect on the direction of European Metals i.e., European Metals and Adriatic Metals go up and down completely randomly.

Pair Corralation between European Metals and Adriatic Metals

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Adriatic Metals. In addition to that, European Metals is 1.48 times more volatile than Adriatic Metals. It trades about -0.06 of its total potential returns per unit of risk. Adriatic Metals is currently generating about 0.02 per unit of volatility. If you would invest  17,840  in Adriatic Metals on October 11, 2024 and sell it today you would earn a total of  1,260  from holding Adriatic Metals or generate 7.06% return on investment over 90 days.

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

European Metals Holdings  vs.  Adriatic Metals

European Metals Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in European Metals Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, European Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Adriatic Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adriatic Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Adriatic Metals is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with European Metals and Adriatic Metals

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

The idea behind European Metals Holdings and Adriatic 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.