Correlation Between European Metals and XLMedia PLC

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

Diversification Opportunities for European Metals and XLMedia PLC

-0.37

Correlation Coefficient

European Metals  XLMedia PLC

Very good diversification

The 3 months correlation between European and XLMedia is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and XLMedia PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XLMedia 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 XLMedia PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XLMedia PLC has no effect on the direction of European Metals i.e., European Metals and XLMedia PLC go up and down completely randomly.

Pair Corralation between European Metals and XLMedia PLC

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the XLMedia PLC. But the stock apears to be less risky and, when comparing its historical volatility, European Metals Holdings is 1.02 times less risky than XLMedia PLC. The stock trades about -0.1 of its potential returns per unit of risk. The XLMedia PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,000.00  in XLMedia PLC on September 3, 2024 and sell it today you would earn a total of  190.00  from holding XLMedia PLC or generate 19.0% 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.  XLMedia 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.

XLMedia PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in XLMedia PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, XLMedia PLC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Metals and XLMedia PLC

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

The idea behind European Metals Holdings and XLMedia 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.