Correlation Between European Metals and American Homes
Can any of the company-specific risk be diversified away by investing in both European Metals and American Homes 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 European Metals and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Metals Holdings and American Homes 4, you can compare the effects of market volatilities on European Metals and American Homes 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 European Metals with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and American Homes.
Diversification Opportunities for European Metals and American Homes
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between European and American is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 and European 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 European Metals Holdings are associated (or correlated) with American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of European Metals i.e., European Metals and American Homes go up and down completely randomly.
Pair Corralation between European Metals and American Homes
Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the American Homes. In addition to that, European Metals is 3.6 times more volatile than American Homes 4. It trades about -0.1 of its total potential returns per unit of risk. American Homes 4 is currently generating about 0.03 per unit of volatility. If you would invest 3,502 in American Homes 4 on September 14, 2024 and sell it today you would earn a total of 305.00 from holding American Homes 4 or generate 8.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.94% |
| Values | Daily Returns |
European Metals Holdings vs. American Homes 4
Performance |
| Timeline |
| European Metals Holdings |
| American Homes 4 |
European Metals and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and American Homes
The main advantage of trading using opposite European Metals and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals position performs unexpectedly, American Homes 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 American Homes will offset losses from the drop in American Homes' long position.| European Metals vs. Made Tech Group | European Metals vs. Ecclesiastical Insurance Office | European Metals vs. Concurrent Technologies Plc | European Metals vs. Roper Technologies |
| American Homes vs. European Metals Holdings | American Homes vs. Omega Healthcare Investors | American Homes vs. Empire Metals Limited | American Homes vs. Induction Healthcare Group |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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