Correlation Between Europa Metals and Satrix Swix

Can any of the company-specific risk be diversified away by investing in both Europa Metals and Satrix Swix 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 Swix 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 Swix Top, you can compare the effects of market volatilities on Europa Metals and Satrix Swix 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 Swix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europa Metals and Satrix Swix.

Diversification Opportunities for Europa Metals and Satrix Swix

0.43

Correlation Coefficient

Europa Metals  Satrix Swix

Very weak diversification

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

Pair Corralation between Europa Metals and Satrix Swix

Assuming the 90 days trading horizon Europa Metals is expected to generate 19.27 times more return on investment than Satrix Swix. However, Europa Metals is 19.27 times more volatile than Satrix Swix Top. It trades about 0.05 of its potential returns per unit of risk. Satrix Swix Top is currently generating about -0.09 per unit of risk. If you would invest  4,900  in Europa Metals on October 20, 2024 and sell it today you would lose (700.00) 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	98.39%
Values	Daily Returns

Europa Metals  vs.  Satrix Swix Top

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.

Satrix Swix Top

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Satrix Swix Top has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Satrix Swix is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Europa Metals and Satrix Swix

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

The idea behind Europa Metals and Satrix Swix Top 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.