Correlation Between European Metals and Ameriprise Financial

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

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

Diversification Opportunities for European Metals and Ameriprise Financial

-0.38

Correlation Coefficient

European Metals  Ameriprise Financial

Very good diversification

The 3 months correlation between European and Ameriprise is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial and European Metals 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 European Metals Holdings are associated (or correlated) with Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of European Metals i.e., European Metals and Ameriprise Financial go up and down completely randomly.

Pair Corralation between European Metals and Ameriprise Financial

Assuming the 90 days trading horizon European Metals is expected to generate 4.74 times less return on investment than Ameriprise Financial. In addition to that, European Metals is 1.85 times more volatile than Ameriprise Financial. It trades about 0.02 of its total potential returns per unit of risk. Ameriprise Financial is currently generating about 0.14 per unit of volatility. If you would invest  46,122  in Ameriprise Financial on September 23, 2024 and sell it today you would earn a total of  7,273  from holding Ameriprise Financial or generate 15.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

European Metals Holdings  vs.  Ameriprise Financial

European Metals Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in European Metals Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, European Metals is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Ameriprise Financial

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Ameriprise Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak basic indicators, Ameriprise Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Metals and Ameriprise Financial

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

The idea behind European Metals Holdings and Ameriprise Financial 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.