Correlation Between European Metals and Guaranty Trust

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

Diversification Opportunities for European Metals and Guaranty Trust

-0.46

Correlation Coefficient

European Metals  Guaranty Trust

Very good diversification

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

Pair Corralation between European Metals and Guaranty Trust

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Guaranty Trust. In addition to that, European Metals is 2.32 times more volatile than Guaranty Trust Holding. It trades about -0.05 of its total potential returns per unit of risk. Guaranty Trust Holding is currently generating about 0.01 per unit of volatility. If you would invest  185.00  in Guaranty Trust Holding on September 27, 2024 and sell it today you would earn a total of  0.00  from holding Guaranty Trust Holding or generate 0.0% 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.  Guaranty Trust Holding

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 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.

Guaranty Trust Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guaranty Trust Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Guaranty Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with European Metals and Guaranty Trust

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

The idea behind European Metals Holdings and Guaranty Trust Holding 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.