Correlation Between Europa Metals and NewWave GBP

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

By analyzing existing cross correlation between Europa Metals and NewWave GBP Currency, you can compare the effects of market volatilities on Europa Metals and NewWave GBP 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 NewWave GBP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europa Metals and NewWave GBP.

Diversification Opportunities for Europa Metals and NewWave GBP

-0.4

Correlation Coefficient

Europa Metals  NewWave GBP

Very good diversification

The 3 months correlation between Europa and NewWave is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Europa Metals and NewWave GBP Currency in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewWave GBP Currency 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 NewWave GBP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewWave GBP Currency has no effect on the direction of Europa Metals i.e., Europa Metals and NewWave GBP go up and down completely randomly.

Pair Corralation between Europa Metals and NewWave GBP

Assuming the 90 days trading horizon Europa Metals is expected to generate 23.27 times more return on investment than NewWave GBP. However, Europa Metals is 23.27 times more volatile than NewWave GBP Currency. It trades about 0.04 of its potential returns per unit of risk. NewWave GBP Currency is currently generating about 0.13 per unit of risk. If you would invest  5,400  in Europa Metals on October 8, 2024 and sell it today you would lose (300.00) from holding Europa Metals or give up 5.56% of portfolio value over 90 days.

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

Europa Metals  vs.  NewWave GBP Currency

Europa Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Europa Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Europa Metals exhibited solid returns over the last few months and may actually be approaching a breakup point.

NewWave GBP Currency

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NewWave GBP Currency are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, NewWave GBP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Europa Metals and NewWave GBP

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

The idea behind Europa Metals and NewWave GBP Currency 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.