Correlation Between Euro Manganese and Themac Resources

Can any of the company-specific risk be diversified away by investing in both Euro Manganese and Themac Resources 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 Euro Manganese and Themac Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Euro Manganese and Themac Resources Group, you can compare the effects of market volatilities on Euro Manganese and Themac Resources 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 Euro Manganese with a short position of Themac Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Euro Manganese and Themac Resources.

Diversification Opportunities for Euro Manganese and Themac Resources

0.56

Correlation Coefficient

Euro Manganese  Themac Resources

Very weak diversification

The 3 months correlation between Euro and Themac is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Euro Manganese and Themac Resources Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themac Resources and Euro Manganese 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 Euro Manganese are associated (or correlated) with Themac Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themac Resources has no effect on the direction of Euro Manganese i.e., Euro Manganese and Themac Resources go up and down completely randomly.

Pair Corralation between Euro Manganese and Themac Resources

Assuming the 90 days horizon Euro Manganese is expected to generate 1.26 times less return on investment than Themac Resources. But when comparing it to its historical volatility, Euro Manganese is 1.59 times less risky than Themac Resources. It trades about 0.16 of its potential returns per unit of risk. Themac Resources Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2.93  in Themac Resources Group on December 28, 2024 and sell it today you would earn a total of  2.07  from holding Themac Resources Group or generate 70.65% return on investment over 90 days.

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

Euro Manganese  vs.  Themac Resources Group

Euro Manganese

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Euro Manganese are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Euro Manganese reported solid returns over the last few months and may actually be approaching a breakup point.

Themac Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Themac Resources Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Themac Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Euro Manganese and Themac Resources

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

The idea behind Euro Manganese and Themac Resources Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.