Correlation Between Europa Metals and International Biotechnology

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

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

Diversification Opportunities for Europa Metals and International Biotechnology

0.63

Correlation Coefficient

Europa Metals  International Biotechnology

Poor diversification

The 3 months correlation between Europa and International is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Europa Metals and International Biotechnology Tr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Biotechnology 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 International Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Biotechnology has no effect on the direction of Europa Metals i.e., Europa Metals and International Biotechnology go up and down completely randomly.

Pair Corralation between Europa Metals and International Biotechnology

Assuming the 90 days trading horizon Europa Metals is expected to under-perform the International Biotechnology. In addition to that, Europa Metals is 5.51 times more volatile than International Biotechnology Trust. It trades about -0.1 of its total potential returns per unit of risk. International Biotechnology Trust is currently generating about -0.05 per unit of volatility. If you would invest  68,000  in International Biotechnology Trust on December 25, 2024 and sell it today you would lose (2,400) from holding International Biotechnology Trust or give up 3.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Europa Metals  vs.  International Biotechnology Tr

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.

International Biotechnology

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Biotechnology Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, International Biotechnology is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Europa Metals and International Biotechnology

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

The idea behind Europa Metals and International Biotechnology Trust 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.