Correlation Between Pampa Energia and European Metals

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

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

Diversification Opportunities for Pampa Energia and European Metals

-0.01

Correlation Coefficient

Pampa Energia  European Metals

Good diversification

The 3 months correlation between Pampa and European is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Pampa Energia SA 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 Pampa Energia 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 Pampa Energia SA 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 Pampa Energia i.e., Pampa Energia and European Metals go up and down completely randomly.

Pair Corralation between Pampa Energia and European Metals

Considering the 90-day investment horizon Pampa Energia SA is expected to under-perform the European Metals. But the stock apears to be less risky and, when comparing its historical volatility, Pampa Energia SA is 2.54 times less risky than European Metals. The stock trades about -0.02 of its potential returns per unit of risk. The European Metals Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  9.10  in European Metals Holdings on December 20, 2024 and sell it today you would earn a total of  1.90  from holding European Metals Holdings or generate 20.88% return on investment over 90 days.

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

Pampa Energia SA  vs.  European Metals Holdings

Pampa Energia SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pampa Energia SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Pampa Energia is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

European Metals Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in European Metals Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, European Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pampa Energia and European Metals

The main advantage of trading using opposite Pampa Energia and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pampa Energia 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 Pampa Energia SA 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.