Correlation Between Europa Metals and United Airlines

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

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

Diversification Opportunities for Europa Metals and United Airlines

-0.4

Correlation Coefficient

Europa Metals  United Airlines

Very good diversification

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

Pair Corralation between Europa Metals and United Airlines

Assuming the 90 days trading horizon Europa Metals is expected to under-perform the United Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Europa Metals is 2.98 times less risky than United Airlines. The stock trades about -0.19 of its potential returns per unit of risk. The United Airlines Holdings is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest  4,352  in United Airlines Holdings on September 1, 2024 and sell it today you would earn a total of  5,288  from holding United Airlines Holdings or generate 121.51% return on investment over 90 days.

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

Europa Metals  vs.  United Airlines Holdings

Europa Metals

Risk-Adjusted Performance

0 of 100

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 latest uncertain 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.

United Airlines Holdings

Risk-Adjusted Performance

36 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 36 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, United Airlines unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Europa Metals and United Airlines

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

The idea behind Europa Metals and United Airlines 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.