Correlation Between European Metals and International Consolidated

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

Diversification Opportunities for European Metals and International Consolidated

-0.66

Correlation Coefficient

European Metals  International Consolidated

Excellent diversification

The 3 months correlation between European and International is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated 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 International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of European Metals i.e., European Metals and International Consolidated go up and down completely randomly.

Pair Corralation between European Metals and International Consolidated

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the International Consolidated. In addition to that, European Metals is 2.09 times more volatile than International Consolidated Airlines. It trades about -0.05 of its total potential returns per unit of risk. International Consolidated Airlines is currently generating about 0.81 per unit of volatility. If you would invest  24,600  in International Consolidated Airlines on September 23, 2024 and sell it today you would earn a total of  5,980  from holding International Consolidated Airlines or generate 24.31% 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.  International Consolidated Air

European Metals Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in European Metals Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

International Consolidated

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, International Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Metals and International Consolidated

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

The idea behind European Metals Holdings and International Consolidated Airlines 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.