Correlation Between Regions Financial and European Metals

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

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

Diversification Opportunities for Regions Financial and European Metals

-0.4

Correlation Coefficient

Regions Financial  European Metals

Very good diversification

The 3 months correlation between Regions and European is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial Corp 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 Regions Financial 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 Regions Financial Corp 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 Regions Financial i.e., Regions Financial and European Metals go up and down completely randomly.

Pair Corralation between Regions Financial and European Metals

Assuming the 90 days trading horizon Regions Financial Corp is expected to generate 0.58 times more return on investment than European Metals. However, Regions Financial Corp is 1.74 times less risky than European Metals. It trades about 0.04 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.05 per unit of risk. If you would invest  2,304  in Regions Financial Corp on September 28, 2024 and sell it today you would earn a total of  77.00  from holding Regions Financial Corp or generate 3.34% return on investment over 90 days.

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

Regions Financial Corp  vs.  European Metals Holdings

Regions Financial Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Regions Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

European Metals Holdings

Risk-Adjusted Performance

0 of 100

Very 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 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 Regions Financial and European Metals

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