Correlation Between European Metals and Indivior PLC

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

Diversification Opportunities for European Metals and Indivior PLC

-0.74

Correlation Coefficient

European Metals  Indivior PLC

Pay attention - limited upside

The 3 months correlation between European and Indivior is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Indivior PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indivior 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 Indivior PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indivior PLC has no effect on the direction of European Metals i.e., European Metals and Indivior PLC go up and down completely randomly.

Pair Corralation between European Metals and Indivior PLC

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Indivior PLC. But the stock apears to be less risky and, when comparing its historical volatility, European Metals Holdings is 1.14 times less risky than Indivior PLC. The stock trades about -0.19 of its potential returns per unit of risk. The Indivior PLC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  82,550  in Indivior PLC on September 21, 2024 and sell it today you would earn a total of  8,800  from holding Indivior PLC or generate 10.66% 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.  Indivior PLC

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.

Indivior PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indivior PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indivior PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Metals and Indivior PLC

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

The idea behind European Metals Holdings and Indivior 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.