Correlation Between HomeChoice Investments and Europa Metals

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

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

Diversification Opportunities for HomeChoice Investments and Europa Metals

0.54

Correlation Coefficient

HomeChoice Investments  Europa Metals

Very weak diversification

The 3 months correlation between HomeChoice and Europa is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding HomeChoice Investments and Europa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europa Metals and HomeChoice Investments 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 HomeChoice Investments 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 HomeChoice Investments i.e., HomeChoice Investments and Europa Metals go up and down completely randomly.

Pair Corralation between HomeChoice Investments and Europa Metals

Assuming the 90 days trading horizon HomeChoice Investments is expected to generate 11.7 times less return on investment than Europa Metals. But when comparing it to its historical volatility, HomeChoice Investments is 4.32 times less risky than Europa Metals. It trades about 0.01 of its potential returns per unit of risk. Europa Metals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,400  in Europa Metals on October 11, 2024 and sell it today you would lose (400.00) from holding Europa Metals or give up 7.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

HomeChoice Investments  vs.  Europa Metals

HomeChoice Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HomeChoice Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Europa Metals

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Europa Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Europa Metals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HomeChoice Investments and Europa Metals

The main advantage of trading using opposite HomeChoice Investments and Europa Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HomeChoice Investments 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 HomeChoice Investments 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.