Correlation Between European Metals and Alkemy Capital

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

Diversification Opportunities for European Metals and Alkemy Capital

-0.68

Correlation Coefficient

European Metals  Alkemy Capital

Excellent diversification

The 3 months correlation between European and Alkemy is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Alkemy Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkemy Capital Inves 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 Alkemy Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkemy Capital Inves has no effect on the direction of European Metals i.e., European Metals and Alkemy Capital go up and down completely randomly.

Pair Corralation between European Metals and Alkemy Capital

Assuming the 90 days trading horizon European Metals is expected to generate 2.29 times less return on investment than Alkemy Capital. But when comparing it to its historical volatility, European Metals Holdings is 2.26 times less risky than Alkemy Capital. It trades about 0.11 of its potential returns per unit of risk. Alkemy Capital Investments is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  13,000  in Alkemy Capital Investments on October 26, 2024 and sell it today you would earn a total of  1,750  from holding Alkemy Capital Investments or generate 13.46% return on investment over 90 days.

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

European Metals Holdings  vs.  Alkemy Capital Investments

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Alkemy Capital Inves

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alkemy Capital Investments are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Alkemy Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Metals and Alkemy Capital

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

The idea behind European Metals Holdings and Alkemy Capital Investments 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.