Correlation Between EuropaCorp and Glatfelter

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

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

Diversification Opportunities for EuropaCorp and Glatfelter

-0.53

Correlation Coefficient

EuropaCorp  Glatfelter

Excellent diversification

The 3 months correlation between EuropaCorp and Glatfelter is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding EuropaCorp and Glatfelter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glatfelter and EuropaCorp 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 EuropaCorp are associated (or correlated) with Glatfelter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glatfelter has no effect on the direction of EuropaCorp i.e., EuropaCorp and Glatfelter go up and down completely randomly.

Pair Corralation between EuropaCorp and Glatfelter

Assuming the 90 days horizon EuropaCorp is expected to under-perform the Glatfelter. In addition to that, EuropaCorp is 1.41 times more volatile than Glatfelter. It trades about -0.15 of its total potential returns per unit of risk. Glatfelter is currently generating about 0.01 per unit of volatility. If you would invest  2,041  in Glatfelter on September 19, 2024 and sell it today you would lose (9.00) from holding Glatfelter or give up 0.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.92%
Values	Daily Returns

EuropaCorp  vs.  Glatfelter

EuropaCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EuropaCorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Glatfelter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Glatfelter has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Glatfelter is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with EuropaCorp and Glatfelter

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

The idea behind EuropaCorp and Glatfelter 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.