Correlation Between Hilton Food and European Metals

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

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

Diversification Opportunities for Hilton Food and European Metals

0.09

Correlation Coefficient

Hilton Food  European Metals

Significant diversification

The 3 months correlation between Hilton and European is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Food Group and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings and Hilton Food 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 Hilton Food Group are associated (or correlated) with European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of Hilton Food i.e., Hilton Food and European Metals go up and down completely randomly.

Pair Corralation between Hilton Food and European Metals

Assuming the 90 days trading horizon Hilton Food Group is expected to generate 0.36 times more return on investment than European Metals. However, Hilton Food Group is 2.78 times less risky than European Metals. It trades about -0.03 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.11 per unit of risk. If you would invest  94,002  in Hilton Food Group on September 4, 2024 and sell it today you would lose (3,302) from holding Hilton Food Group or give up 3.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Hilton Food Group  vs.  European Metals Holdings

Hilton Food Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

European Metals Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Metals Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Hilton Food and European Metals

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

The idea behind Hilton Food Group and European Metals Holdings 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.