Correlation Between NewFunds TRACI and Europa Metals

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

By analyzing existing cross correlation between NewFunds TRACI 3 and Europa Metals, you can compare the effects of market volatilities on NewFunds TRACI 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 NewFunds TRACI with a short position of Europa Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of NewFunds TRACI and Europa Metals.

Diversification Opportunities for NewFunds TRACI and Europa Metals

-0.14

Correlation Coefficient

NewFunds TRACI  Europa Metals

Good diversification

The 3 months correlation between NewFunds and Europa is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding NewFunds TRACI 3 and Europa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europa Metals and NewFunds TRACI 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 NewFunds TRACI 3 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 NewFunds TRACI i.e., NewFunds TRACI and Europa Metals go up and down completely randomly.

Pair Corralation between NewFunds TRACI and Europa Metals

Assuming the 90 days trading horizon NewFunds TRACI is expected to generate 14.83 times less return on investment than Europa Metals. But when comparing it to its historical volatility, NewFunds TRACI 3 is 53.23 times less risky than Europa Metals. It trades about 0.25 of its potential returns per unit of risk. Europa Metals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,000  in Europa Metals on October 11, 2024 and sell it today you would earn a total of  0.00  from holding Europa Metals or generate 0.0% return on investment over 90 days.

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

NewFunds TRACI 3  vs.  Europa Metals

NewFunds TRACI 3

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NewFunds TRACI 3 are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NewFunds TRACI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Europa Metals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Europa Metals are ranked lower than 5 (%) 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 NewFunds TRACI and Europa Metals

The main advantage of trading using opposite NewFunds TRACI and Europa Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NewFunds TRACI 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 NewFunds TRACI 3 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.