Correlation Between European Metals and Knights Group

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

Diversification Opportunities for European Metals and Knights Group

0.76

Correlation Coefficient

European Metals  Knights Group

Poor diversification

The 3 months correlation between European and Knights is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Knights Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knights Group Holdings 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 Knights Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knights Group Holdings has no effect on the direction of European Metals i.e., European Metals and Knights Group go up and down completely randomly.

Pair Corralation between European Metals and Knights Group

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Knights Group. In addition to that, European Metals is 1.25 times more volatile than Knights Group Holdings. It trades about -0.06 of its total potential returns per unit of risk. Knights Group Holdings is currently generating about 0.03 per unit of volatility. If you would invest  9,450  in Knights Group Holdings on October 10, 2024 and sell it today you would earn a total of  2,500  from holding Knights Group Holdings or generate 26.46% return on investment over 90 days.

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

European Metals Holdings  vs.  Knights Group Holdings

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.

Knights Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Knights Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Knights Group is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with European Metals and Knights Group

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

The idea behind European Metals Holdings and Knights Group Holdings 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.