Correlation Between Intermediate Capital and European Metals

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

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

Diversification Opportunities for Intermediate Capital and European Metals

-0.14

Correlation Coefficient

Intermediate Capital  European Metals

Good diversification

The 3 months correlation between Intermediate and European is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Capital Group and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings and Intermediate Capital 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 Intermediate Capital Group are associated (or correlated) with European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of Intermediate Capital i.e., Intermediate Capital and European Metals go up and down completely randomly.

Pair Corralation between Intermediate Capital and European Metals

Assuming the 90 days trading horizon Intermediate Capital Group is expected to generate 0.52 times more return on investment than European Metals. However, Intermediate Capital Group is 1.94 times less risky than European Metals. It trades about 0.07 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.06 per unit of risk. If you would invest  120,249  in Intermediate Capital Group on October 12, 2024 and sell it today you would earn a total of  87,551  from holding Intermediate Capital Group or generate 72.81% return on investment over 90 days.

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

Intermediate Capital Group  vs.  European Metals Holdings

Intermediate Capital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Capital Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Intermediate Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

European Metals Holdings

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Intermediate Capital and European Metals

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

The idea behind Intermediate Capital Group and European Metals 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.