Correlation Between Europa Metals and Growthpoint Properties

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

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

Diversification Opportunities for Europa Metals and Growthpoint Properties

0.25

Correlation Coefficient

Europa Metals  Growthpoint Properties

Modest diversification

The 3 months correlation between Europa and Growthpoint is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Europa Metals and Growthpoint Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growthpoint Properties 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 Growthpoint Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growthpoint Properties has no effect on the direction of Europa Metals i.e., Europa Metals and Growthpoint Properties go up and down completely randomly.

Pair Corralation between Europa Metals and Growthpoint Properties

Assuming the 90 days trading horizon Europa Metals is expected to generate 12.1 times more return on investment than Growthpoint Properties. However, Europa Metals is 12.1 times more volatile than Growthpoint Properties. It trades about 0.07 of its potential returns per unit of risk. Growthpoint Properties is currently generating about -0.02 per unit of risk. If you would invest  5,000  in Europa Metals on September 17, 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 Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Europa Metals  vs.  Growthpoint Properties

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.

Growthpoint Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Growthpoint Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Growthpoint Properties is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Europa Metals and Growthpoint Properties

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

The idea behind Europa Metals and Growthpoint Properties 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.