Correlation Between European Metals and GSTechnologies

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

Diversification Opportunities for European Metals and GSTechnologies

-0.46

Correlation Coefficient

European Metals  GSTechnologies

Very good diversification

The 3 months correlation between European and GSTechnologies is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and GSTechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSTechnologies 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 GSTechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSTechnologies has no effect on the direction of European Metals i.e., European Metals and GSTechnologies go up and down completely randomly.

Pair Corralation between European Metals and GSTechnologies

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the GSTechnologies. But the stock apears to be less risky and, when comparing its historical volatility, European Metals Holdings is 2.79 times less risky than GSTechnologies. The stock trades about -0.12 of its potential returns per unit of risk. The GSTechnologies is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  73.00  in GSTechnologies on October 22, 2024 and sell it today you would earn a total of  142.00  from holding GSTechnologies or generate 194.52% 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.  GSTechnologies

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.

GSTechnologies

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GSTechnologies are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, GSTechnologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Metals and GSTechnologies

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

The idea behind European Metals Holdings and GSTechnologies 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 Global Correlations module to find global opportunities by holding instruments from different markets.