Correlation Between Europa Metals and CoreShares

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

By analyzing existing cross correlation between Europa Metals and CoreShares SP Global, you can compare the effects of market volatilities on Europa Metals and CoreShares 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 CoreShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europa Metals and CoreShares.

Diversification Opportunities for Europa Metals and CoreShares

-0.48

Correlation Coefficient

Europa Metals  CoreShares

Very good diversification

The 3 months correlation between Europa and CoreShares is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Europa Metals and CoreShares SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoreShares SP Global 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 CoreShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoreShares SP Global has no effect on the direction of Europa Metals i.e., Europa Metals and CoreShares go up and down completely randomly.

Pair Corralation between Europa Metals and CoreShares

Assuming the 90 days trading horizon Europa Metals is expected to generate 15.07 times more return on investment than CoreShares. However, Europa Metals is 15.07 times more volatile than CoreShares SP Global. It trades about 0.07 of its potential returns per unit of risk. CoreShares SP Global is currently generating about 0.0 per unit of risk. If you would invest  5,000  in Europa Metals on September 16, 2024 and sell it today you would earn a total of  400.00  from holding Europa Metals or generate 8.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Europa Metals  vs.  CoreShares SP Global

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.

CoreShares SP Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CoreShares SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, CoreShares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Europa Metals and CoreShares

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

The idea behind Europa Metals and CoreShares SP Global 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .