Correlation Between Europa Metals and Coronation Smaller

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

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

Diversification Opportunities for Europa Metals and Coronation Smaller

-0.13

Correlation Coefficient

Europa Metals  Coronation Smaller

Good diversification

The 3 months correlation between Europa and Coronation is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Europa Metals and Coronation Smaller Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Smaller and Europa 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 Europa Metals are associated (or correlated) with Coronation Smaller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coronation Smaller has no effect on the direction of Europa Metals i.e., Europa Metals and Coronation Smaller go up and down completely randomly.

Pair Corralation between Europa Metals and Coronation Smaller

Assuming the 90 days trading horizon Europa Metals is expected to generate 13.97 times more return on investment than Coronation Smaller. However, Europa Metals is 13.97 times more volatile than Coronation Smaller Companies. It trades about 0.07 of its potential returns per unit of risk. Coronation Smaller Companies is currently generating about 0.23 per unit of risk. If you would invest  3,900  in Europa Metals on September 13, 2024 and sell it today you would earn a total of  1,500  from holding Europa Metals or generate 38.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.32%
Values	Daily Returns

Europa Metals  vs.  Coronation Smaller Companies

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.

Coronation Smaller

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Smaller Companies are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly weak basic indicators, Coronation Smaller may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Europa Metals and Coronation Smaller

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

The idea behind Europa Metals and Coronation Smaller Companies 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.