Correlation Between European Metals and Capital Drilling

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

Diversification Opportunities for European Metals and Capital Drilling

-0.59

Correlation Coefficient

European Metals  Capital Drilling

Excellent diversification

The 3 months correlation between European and Capital is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling 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 Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of European Metals i.e., European Metals and Capital Drilling go up and down completely randomly.

Pair Corralation between European Metals and Capital Drilling

Assuming the 90 days trading horizon European Metals Holdings is expected to generate 1.47 times more return on investment than Capital Drilling. However, European Metals is 1.47 times more volatile than Capital Drilling. It trades about 0.08 of its potential returns per unit of risk. Capital Drilling is currently generating about -0.11 per unit of risk. If you would invest  725.00  in European Metals Holdings on December 24, 2024 and sell it today you would earn a total of  150.00  from holding European Metals Holdings or generate 20.69% return on investment over 90 days.

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

European Metals Holdings  vs.  Capital Drilling

European Metals Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in European Metals Holdings are ranked lower than 6 (%) 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.

Capital Drilling

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Drilling 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 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 Capital Drilling

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

The idea behind European Metals Holdings and Capital Drilling 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.