Correlation Between CA Sales and Europa Metals

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

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

Diversification Opportunities for CA Sales and Europa Metals

-0.09

Correlation Coefficient

CA Sales  Europa Metals

Good diversification

The 3 months correlation between CAA and Europa is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding CA Sales Holdings and Europa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europa Metals and CA Sales 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 CA Sales Holdings 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 CA Sales i.e., CA Sales and Europa Metals go up and down completely randomly.

Pair Corralation between CA Sales and Europa Metals

Assuming the 90 days trading horizon CA Sales is expected to generate 4.88 times less return on investment than Europa Metals. But when comparing it to its historical volatility, CA Sales Holdings is 6.59 times less risky than Europa Metals. It trades about 0.04 of its potential returns per unit of risk. Europa Metals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,500  in Europa Metals on September 5, 2024 and sell it today you would lose (1,500) from holding Europa Metals or give up 23.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

CA Sales Holdings  vs.  Europa Metals

CA Sales Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CA Sales Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, CA Sales may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Europa Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Europa Metals are ranked lower than 4 (%) 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 CA Sales and Europa Metals

The main advantage of trading using opposite CA Sales and Europa Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CA Sales 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 CA Sales Holdings 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 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.