Correlation Between European Metals and Critical Elements

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

Diversification Opportunities for European Metals and Critical Elements

0.0

Correlation Coefficient

European Metals  Critical Elements

Pay attention - limited upside

The 3 months correlation between European and Critical is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Critical Elements in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Critical Elements 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 Critical Elements. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Critical Elements has no effect on the direction of European Metals i.e., European Metals and Critical Elements go up and down completely randomly.

Pair Corralation between European Metals and Critical Elements

If you would invest  26.00  in Critical Elements on December 30, 2024 and sell it today you would earn a total of  9.00  from holding Critical Elements or generate 34.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

European Metals Holdings  vs.  Critical Elements

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. Despite nearly stable basic indicators, European Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Critical Elements

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Critical Elements are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Critical Elements reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Metals and Critical Elements

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

The idea behind European Metals Holdings and Critical Elements 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.