Correlation Between Europa Metals and Satrix 40

Can any of the company-specific risk be diversified away by investing in both Europa Metals and Satrix 40 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 Satrix 40 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Europa Metals and Satrix 40 ETF, you can compare the effects of market volatilities on Europa Metals and Satrix 40 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 Satrix 40. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europa Metals and Satrix 40.

Diversification Opportunities for Europa Metals and Satrix 40

0.17

Correlation Coefficient

Europa Metals  Satrix 40

Average diversification

The 3 months correlation between Europa and Satrix is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Europa Metals and Satrix 40 ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Satrix 40 ETF 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 Satrix 40. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Satrix 40 ETF has no effect on the direction of Europa Metals i.e., Europa Metals and Satrix 40 go up and down completely randomly.

Pair Corralation between Europa Metals and Satrix 40

Assuming the 90 days trading horizon Europa Metals is expected to generate 9.08 times more return on investment than Satrix 40. However, Europa Metals is 9.08 times more volatile than Satrix 40 ETF. It trades about 0.04 of its potential returns per unit of risk. Satrix 40 ETF is currently generating about 0.02 per unit of risk. If you would invest  5,000  in Europa Metals on October 7, 2024 and sell it today you would earn a total of  100.00  from holding Europa Metals or generate 2.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Europa Metals  vs.  Satrix 40 ETF

Europa Metals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Europa Metals are ranked lower than 3 (%) 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.

Satrix 40 ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Satrix 40 ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Satrix 40 is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Europa Metals and Satrix 40

The main advantage of trading using opposite Europa Metals and Satrix 40 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europa Metals position performs unexpectedly, Satrix 40 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 Satrix 40 will offset losses from the drop in Satrix 40's long position.

The idea behind Europa Metals and Satrix 40 ETF 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.