Correlation Between European Metals and PCI PAL

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

Diversification Opportunities for European Metals and PCI PAL

0.58

Correlation Coefficient

European Metals  PCI PAL

Very weak diversification

The 3 months correlation between European and PCI is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and PCI PAL PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCI PAL 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 PCI PAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCI PAL PLC has no effect on the direction of European Metals i.e., European Metals and PCI PAL go up and down completely randomly.

Pair Corralation between European Metals and PCI PAL

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the PCI PAL. In addition to that, European Metals is 2.22 times more volatile than PCI PAL PLC. It trades about -0.1 of its total potential returns per unit of risk. PCI PAL PLC is currently generating about -0.04 per unit of volatility. If you would invest  6,250  in PCI PAL PLC on December 4, 2024 and sell it today you would lose (250.00) from holding PCI PAL PLC or give up 4.0% of portfolio value over 90 days.

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

European Metals Holdings  vs.  PCI PAL PLC

European Metals Holdings

Risk-Adjusted Performance

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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

PCI PAL PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days PCI PAL PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PCI PAL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with European Metals and PCI PAL

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

The idea behind European Metals Holdings and PCI PAL 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.