Correlation Between European Metals and Aurelia Metals

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

Diversification Opportunities for European Metals and Aurelia Metals

0.02

Correlation Coefficient

European Metals  Aurelia Metals

Significant diversification

The 3 months correlation between European and Aurelia is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Aurelia Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurelia Metals 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 Aurelia Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurelia Metals has no effect on the direction of European Metals i.e., European Metals and Aurelia Metals go up and down completely randomly.

Pair Corralation between European Metals and Aurelia Metals

Assuming the 90 days horizon European Metals Holdings is expected to generate 7.52 times more return on investment than Aurelia Metals. However, European Metals is 7.52 times more volatile than Aurelia Metals Limited. It trades about 0.06 of its potential returns per unit of risk. Aurelia Metals Limited is currently generating about 0.13 per unit of risk. If you would invest  9.82  in European Metals Holdings on December 21, 2024 and sell it today you would earn a total of  1.18  from holding European Metals Holdings or generate 12.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

European Metals Holdings  vs.  Aurelia Metals Limited

European Metals Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in European Metals Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, European Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Aurelia Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurelia Metals Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aurelia Metals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with European Metals and Aurelia Metals

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

The idea behind European Metals Holdings and Aurelia Metals Limited 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.