Correlation Between Euro Manganese and Wallbridge Mining

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

By analyzing existing cross correlation between Euro Manganese and Wallbridge Mining, you can compare the effects of market volatilities on Euro Manganese and Wallbridge Mining 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 Wallbridge Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Euro Manganese and Wallbridge Mining.

Diversification Opportunities for Euro Manganese and Wallbridge Mining

0.43

Correlation Coefficient

Euro Manganese  Wallbridge Mining

Very weak diversification

The 3 months correlation between Euro and Wallbridge is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Euro Manganese and Wallbridge Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wallbridge Mining 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 Wallbridge Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wallbridge Mining has no effect on the direction of Euro Manganese i.e., Euro Manganese and Wallbridge Mining go up and down completely randomly.

Pair Corralation between Euro Manganese and Wallbridge Mining

Assuming the 90 days horizon Euro Manganese is expected to generate 1.13 times more return on investment than Wallbridge Mining. However, Euro Manganese is 1.13 times more volatile than Wallbridge Mining. It trades about 0.01 of its potential returns per unit of risk. Wallbridge Mining is currently generating about 0.0 per unit of risk. If you would invest  3.50  in Euro Manganese on September 16, 2024 and sell it today you would lose (0.60) from holding Euro Manganese or give up 17.14% of portfolio value over 90 days.

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

Euro Manganese  vs.  Wallbridge Mining

Euro Manganese

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Euro Manganese are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Euro Manganese may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wallbridge Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wallbridge Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Wallbridge Mining is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Euro Manganese and Wallbridge Mining

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

The idea behind Euro Manganese and Wallbridge Mining 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.