Correlation Between European Metals and Mulberry Group
Can any of the company-specific risk be diversified away by investing in both European Metals and Mulberry Group 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 Mulberry Group 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 Mulberry Group PLC, you can compare the effects of market volatilities on European Metals and Mulberry Group 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 Mulberry Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Mulberry Group.
Diversification Opportunities for European Metals and Mulberry Group
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between European and Mulberry is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Mulberry Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mulberry Group PLC 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 Mulberry Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mulberry Group PLC has no effect on the direction of European Metals i.e., European Metals and Mulberry Group go up and down completely randomly.
Pair Corralation between European Metals and Mulberry Group
Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Mulberry Group. But the stock apears to be less risky and, when comparing its historical volatility, European Metals Holdings is 1.78 times less risky than Mulberry Group. The stock trades about -0.26 of its potential returns per unit of risk. The Mulberry Group PLC is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 11,000 in Mulberry Group PLC on September 15, 2024 and sell it today you would lose (300.00) from holding Mulberry Group PLC or give up 2.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Metals Holdings vs. Mulberry Group PLC
Performance |
| Timeline |
| European Metals Holdings |
| Mulberry Group PLC |
European Metals and Mulberry Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and Mulberry Group
The main advantage of trading using opposite European Metals and Mulberry Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals position performs unexpectedly, Mulberry Group 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 Mulberry Group will offset losses from the drop in Mulberry Group's long position.| European Metals vs. Iron Mountain | European Metals vs. British American Tobacco | European Metals vs. Tata Steel Limited | European Metals vs. Hochschild Mining plc |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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