Correlation Between European Metals and Ithaca Energy

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

Diversification Opportunities for European Metals and Ithaca Energy

-0.25

Correlation Coefficient

European Metals  Ithaca Energy

Very good diversification

The 3 months correlation between European and Ithaca is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Ithaca Energy PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ithaca Energy 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 Ithaca Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ithaca Energy PLC has no effect on the direction of European Metals i.e., European Metals and Ithaca Energy go up and down completely randomly.

Pair Corralation between European Metals and Ithaca Energy

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Ithaca Energy. In addition to that, European Metals is 1.12 times more volatile than Ithaca Energy PLC. It trades about -0.09 of its total potential returns per unit of risk. Ithaca Energy PLC is currently generating about 0.04 per unit of volatility. If you would invest  10,330  in Ithaca Energy PLC on September 13, 2024 and sell it today you would earn a total of  530.00  from holding Ithaca Energy PLC or generate 5.13% return on investment over 90 days.

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

European Metals Holdings  vs.  Ithaca Energy 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 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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ithaca Energy PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ithaca Energy PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Ithaca Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with European Metals and Ithaca Energy

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

The idea behind European Metals Holdings and Ithaca Energy 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.