Correlation Between European Metals and International Battery

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

Diversification Opportunities for European Metals and International Battery

-0.67

Correlation Coefficient

European Metals  International Battery

Excellent diversification

The 3 months correlation between European and International is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and International Battery Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Battery 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 International Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Battery has no effect on the direction of European Metals i.e., European Metals and International Battery go up and down completely randomly.

Pair Corralation between European Metals and International Battery

If you would invest  55.00  in European Metals Holdings on September 4, 2024 and sell it today you would earn a total of  0.00  from holding European Metals Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

European Metals Holdings  vs.  International Battery Metals

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. 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.

International Battery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Battery Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with European Metals and International Battery

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

The idea behind European Metals Holdings and International Battery Metals 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.