Correlation Between Europa Metals and Frontier Transport

Can any of the company-specific risk be diversified away by investing in both Europa Metals and Frontier Transport 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 Europa Metals and Frontier Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Europa Metals and Frontier Transport Holdings, you can compare the effects of market volatilities on Europa Metals and Frontier Transport 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 Europa Metals with a short position of Frontier Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europa Metals and Frontier Transport.

Diversification Opportunities for Europa Metals and Frontier Transport

0.54

Correlation Coefficient

Europa Metals  Frontier Transport

Very weak diversification

The 3 months correlation between Europa and Frontier is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Europa Metals and Frontier Transport Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Transport and Europa 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 Europa Metals are associated (or correlated) with Frontier Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Transport has no effect on the direction of Europa Metals i.e., Europa Metals and Frontier Transport go up and down completely randomly.

Pair Corralation between Europa Metals and Frontier Transport

Assuming the 90 days trading horizon Europa Metals is expected to generate 4.59 times more return on investment than Frontier Transport. However, Europa Metals is 4.59 times more volatile than Frontier Transport Holdings. It trades about 0.0 of its potential returns per unit of risk. Frontier Transport Holdings is currently generating about -0.08 per unit of risk. If you would invest  3,500  in Europa Metals on December 23, 2024 and sell it today you would lose (500.00) from holding Europa Metals or give up 14.29% of portfolio value over 90 days.

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

Europa Metals  vs.  Frontier Transport Holdings

Europa Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Europa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Europa Metals is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Frontier Transport

Risk-Adjusted Performance

Very Weak

Over the last 90 days Frontier Transport Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Europa Metals and Frontier Transport

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

The idea behind Europa Metals and Frontier Transport Holdings 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.