Correlation Between Ferrexpo PLC and Europa Metals

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

By analyzing existing cross correlation between Ferrexpo PLC and Europa Metals, you can compare the effects of market volatilities on Ferrexpo PLC and Europa Metals 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 Ferrexpo PLC with a short position of Europa Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferrexpo PLC and Europa Metals.

Diversification Opportunities for Ferrexpo PLC and Europa Metals

-0.22

Correlation Coefficient

Ferrexpo PLC  Europa Metals

Very good diversification

The 3 months correlation between Ferrexpo and Europa is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ferrexpo PLC and Europa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europa Metals and Ferrexpo PLC 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 Ferrexpo PLC are associated (or correlated) with Europa Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europa Metals has no effect on the direction of Ferrexpo PLC i.e., Ferrexpo PLC and Europa Metals go up and down completely randomly.

Pair Corralation between Ferrexpo PLC and Europa Metals

Assuming the 90 days trading horizon Ferrexpo PLC is expected to generate 14.78 times more return on investment than Europa Metals. However, Ferrexpo PLC is 14.78 times more volatile than Europa Metals. It trades about 0.24 of its potential returns per unit of risk. Europa Metals is currently generating about -0.18 per unit of risk. If you would invest  4,220  in Ferrexpo PLC on September 5, 2024 and sell it today you would earn a total of  5,560  from holding Ferrexpo PLC or generate 131.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Ferrexpo PLC  vs.  Europa Metals

Ferrexpo PLC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrexpo PLC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Ferrexpo PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 rather sound technical and fundamental indicators, Europa Metals is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ferrexpo PLC and Europa Metals

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

The idea behind Ferrexpo PLC and Europa Metals 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 CEOs Directory module to screen CEOs from public companies around the world.