Correlation Between European Metals and Supermarket Income

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

Diversification Opportunities for European Metals and Supermarket Income

0.66

Correlation Coefficient

European Metals  Supermarket Income

Poor diversification

The 3 months correlation between European and Supermarket is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Supermarket Income REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supermarket Income REIT 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 Supermarket Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supermarket Income REIT has no effect on the direction of European Metals i.e., European Metals and Supermarket Income go up and down completely randomly.

Pair Corralation between European Metals and Supermarket Income

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Supermarket Income. In addition to that, European Metals is 3.03 times more volatile than Supermarket Income REIT. It trades about -0.05 of its total potential returns per unit of risk. Supermarket Income REIT is currently generating about -0.06 per unit of volatility. If you would invest  7,159  in Supermarket Income REIT on October 8, 2024 and sell it today you would lose (279.00) from holding Supermarket Income REIT or give up 3.9% of portfolio value over 90 days.

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

European Metals Holdings  vs.  Supermarket Income REIT

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 latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Supermarket Income REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Supermarket Income REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Supermarket Income 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 Supermarket Income

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

The idea behind European Metals Holdings and Supermarket Income REIT 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.