Correlation Between European Metals and G5 Entertainment
Can any of the company-specific risk be diversified away by investing in both European Metals and G5 Entertainment 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 G5 Entertainment 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 G5 Entertainment AB, you can compare the effects of market volatilities on European Metals and G5 Entertainment 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 G5 Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and G5 Entertainment.
Diversification Opportunities for European Metals and G5 Entertainment
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between European and 0QUS is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and G5 Entertainment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G5 Entertainment 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 G5 Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G5 Entertainment has no effect on the direction of European Metals i.e., European Metals and G5 Entertainment go up and down completely randomly.
Pair Corralation between European Metals and G5 Entertainment
Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the G5 Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, European Metals Holdings is 1.32 times less risky than G5 Entertainment. The stock trades about -0.37 of its potential returns per unit of risk. The G5 Entertainment AB is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 9,060 in G5 Entertainment AB on August 28, 2024 and sell it today you would earn a total of 840.00 from holding G5 Entertainment AB or generate 9.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
European Metals Holdings vs. G5 Entertainment AB
Performance |
| Timeline |
| European Metals Holdings |
| G5 Entertainment |
European Metals and G5 Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and G5 Entertainment
The main advantage of trading using opposite European Metals and G5 Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals position performs unexpectedly, G5 Entertainment 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 G5 Entertainment will offset losses from the drop in G5 Entertainment's long position.| European Metals vs. Givaudan SA | European Metals vs. Antofagasta PLC | European Metals vs. Centamin PLC | European Metals vs. Atalaya Mining |
| G5 Entertainment vs. Infrastrutture Wireless Italiane | G5 Entertainment vs. MediaZest plc | G5 Entertainment vs. Everyman Media Group | G5 Entertainment vs. Catena Media 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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