Correlation Between BAE Systems and Europa Metals
Can any of the company-specific risk be diversified away by investing in both BAE Systems and Europa 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 BAE Systems and Europa Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BAE Systems plc and Europa Metals, you can compare the effects of market volatilities on BAE Systems and Europa 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 BAE Systems with a short position of Europa Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAE Systems and Europa Metals.
Diversification Opportunities for BAE Systems and Europa Metals
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BAE and Europa is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding BAE Systems plc and Europa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europa Metals and BAE Systems 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 BAE Systems plc are associated (or correlated) with Europa Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europa Metals has no effect on the direction of BAE Systems i.e., BAE Systems and Europa Metals go up and down completely randomly.
Pair Corralation between BAE Systems and Europa Metals
Assuming the 90 days trading horizon BAE Systems plc is expected to generate 1.87 times more return on investment than Europa Metals. However, BAE Systems is 1.87 times more volatile than Europa Metals. It trades about -0.05 of its potential returns per unit of risk. Europa Metals is currently generating about -0.19 per unit of risk. If you would invest 131,209 in BAE Systems plc on September 2, 2024 and sell it today you would lose (8,509) from holding BAE Systems plc or give up 6.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.48% |
| Values | Daily Returns |
BAE Systems plc vs. Europa Metals
Performance |
| Timeline |
| BAE Systems plc |
| Europa Metals |
BAE Systems and Europa Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BAE Systems and Europa Metals
The main advantage of trading using opposite BAE Systems and Europa Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BAE Systems position performs unexpectedly, Europa 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 Europa Metals will offset losses from the drop in Europa Metals' long position.| BAE Systems vs. Roper Technologies | BAE Systems vs. Automatic Data Processing | BAE Systems vs. Vitec Software Group | BAE Systems vs. Uber Technologies |
| Europa Metals vs. Givaudan SA | Europa Metals vs. Antofagasta PLC | Europa Metals vs. Centamin PLC | Europa Metals vs. Atalaya Mining |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |