Correlation Between Golden Metal and Europa Metals

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

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

Diversification Opportunities for Golden Metal and Europa Metals

0.5

Correlation Coefficient

Golden Metal  Europa Metals

Very weak diversification

The 3 months correlation between Golden and Europa is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Golden Metal Resources and Europa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europa Metals and Golden Metal 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 Golden Metal Resources 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 Golden Metal i.e., Golden Metal and Europa Metals go up and down completely randomly.

Pair Corralation between Golden Metal and Europa Metals

Assuming the 90 days trading horizon Golden Metal Resources is expected to generate 4.82 times more return on investment than Europa Metals. However, Golden Metal is 4.82 times more volatile than Europa Metals. It trades about -0.02 of its potential returns per unit of risk. Europa Metals is currently generating about -0.19 per unit of risk. If you would invest  3,400  in Golden Metal Resources on September 3, 2024 and sell it today you would lose (350.00) from holding Golden Metal Resources or give up 10.29% of portfolio value over 90 days.

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

Golden Metal Resources  vs.  Europa Metals

Golden Metal Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Metal Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Golden Metal is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Golden Metal and Europa Metals

The main advantage of trading using opposite Golden Metal and Europa Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Metal 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 Golden Metal Resources 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.