Correlation Between European Metals and Southern Copper
Can any of the company-specific risk be diversified away by investing in both European Metals and Southern Copper 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 Southern Copper 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 Southern Copper Corp, you can compare the effects of market volatilities on European Metals and Southern Copper 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 Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Southern Copper.
Diversification Opportunities for European Metals and Southern Copper
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between European and Southern is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Southern Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper Corp 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 Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper Corp has no effect on the direction of European Metals i.e., European Metals and Southern Copper go up and down completely randomly.
Pair Corralation between European Metals and Southern Copper
Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Southern Copper. In addition to that, European Metals is 1.65 times more volatile than Southern Copper Corp. It trades about -0.28 of its total potential returns per unit of risk. Southern Copper Corp is currently generating about -0.3 per unit of volatility. If you would invest 11,279 in Southern Copper Corp on August 25, 2024 and sell it today you would lose (1,267) from holding Southern Copper Corp or give up 11.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Metals Holdings vs. Southern Copper Corp
Performance |
| Timeline |
| European Metals Holdings |
| Southern Copper Corp |
European Metals and Southern Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and Southern Copper
The main advantage of trading using opposite European Metals and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals position performs unexpectedly, Southern Copper 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 Southern Copper will offset losses from the drop in Southern Copper's long position.| European Metals vs. Synthomer plc | European Metals vs. JB Hunt Transport | European Metals vs. GreenX Metals | European Metals vs. Cizzle Biotechnology Holdings |
| Southern Copper vs. Quadrise Plc | Southern Copper vs. Intuitive Investments Group | Southern Copper vs. European Metals Holdings | Southern Copper vs. Athelney Trust plc |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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