Correlation Between Europa Metals and Alliance Data

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

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

Diversification Opportunities for Europa Metals and Alliance Data

0.54

Correlation Coefficient

Europa Metals  Alliance Data

Very weak diversification

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

Pair Corralation between Europa Metals and Alliance Data

Assuming the 90 days trading horizon Europa Metals is expected to under-perform the Alliance Data. In addition to that, Europa Metals is 2.46 times more volatile than Alliance Data Systems. It trades about -0.09 of its total potential returns per unit of risk. Alliance Data Systems is currently generating about -0.06 per unit of volatility. If you would invest  6,017  in Alliance Data Systems on December 4, 2024 and sell it today you would lose (512.00) from holding Alliance Data Systems or give up 8.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.8%
Values	Daily Returns

Europa Metals  vs.  Alliance Data Systems

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Alliance Data Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alliance Data Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Europa Metals and Alliance Data

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

The idea behind Europa Metals and Alliance Data Systems 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.