Correlation Between European Metals and Capital Metals

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

Diversification Opportunities for European Metals and Capital Metals

0.1

Correlation Coefficient

European Metals  Capital Metals

Average diversification

The 3 months correlation between European and Capital is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Capital Metals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Metals PLC 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 Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Metals PLC has no effect on the direction of European Metals i.e., European Metals and Capital Metals go up and down completely randomly.

Pair Corralation between European Metals and Capital Metals

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Capital Metals. But the stock apears to be less risky and, when comparing its historical volatility, European Metals Holdings is 1.29 times less risky than Capital Metals. The stock trades about -0.1 of its potential returns per unit of risk. The Capital Metals PLC is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  185.00  in Capital Metals PLC on December 1, 2024 and sell it today you would lose (30.00) from holding Capital Metals PLC or give up 16.22% of portfolio value over 90 days.

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

European Metals Holdings  vs.  Capital Metals PLC

European Metals Holdings

Risk-Adjusted Performance

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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Capital Metals PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Metals PLC 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 Capital Metals

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

The idea behind European Metals Holdings and Capital Metals PLC 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.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..