Correlation Between European Metals and SANTANDER

Can any of the company-specific risk be diversified away by investing in both European Metals and SANTANDER 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 SANTANDER 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 SANTANDER UK 8, you can compare the effects of market volatilities on European Metals and SANTANDER 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 SANTANDER. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and SANTANDER.

Diversification Opportunities for European Metals and SANTANDER

0.45

Correlation Coefficient

European Metals  SANTANDER

Very weak diversification

The 3 months correlation between European and SANTANDER is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and SANTANDER UK 8 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANTANDER UK 8 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 SANTANDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANTANDER UK 8 has no effect on the direction of European Metals i.e., European Metals and SANTANDER go up and down completely randomly.

Pair Corralation between European Metals and SANTANDER

Assuming the 90 days trading horizon European Metals Holdings is expected to generate 50.08 times more return on investment than SANTANDER. However, European Metals is 50.08 times more volatile than SANTANDER UK 8. It trades about 0.14 of its potential returns per unit of risk. SANTANDER UK 8 is currently generating about 0.16 per unit of risk. If you would invest  725.00  in European Metals Holdings on December 26, 2024 and sell it today you would earn a total of  1,475  from holding European Metals Holdings or generate 203.45% return on investment over 90 days.

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

European Metals Holdings  vs.  SANTANDER UK 8

European Metals Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in European Metals Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, European Metals exhibited solid returns over the last few months and may actually be approaching a breakup point.

SANTANDER UK 8

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SANTANDER UK 8 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SANTANDER 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 SANTANDER

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

The idea behind European Metals Holdings and SANTANDER UK 8 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 Transaction History module to view history of all your transactions and understand their impact on performance.