Correlation Between European Metals and Reckitt Benckiser
Can any of the company-specific risk be diversified away by investing in both European Metals and Reckitt Benckiser 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 Reckitt Benckiser 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 Reckitt Benckiser Group, you can compare the effects of market volatilities on European Metals and Reckitt Benckiser 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 Reckitt Benckiser. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Reckitt Benckiser.
Diversification Opportunities for European Metals and Reckitt Benckiser
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between European and Reckitt is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Reckitt Benckiser Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reckitt Benckiser 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 Reckitt Benckiser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reckitt Benckiser has no effect on the direction of European Metals i.e., European Metals and Reckitt Benckiser go up and down completely randomly.
Pair Corralation between European Metals and Reckitt Benckiser
Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Reckitt Benckiser. In addition to that, European Metals is 1.8 times more volatile than Reckitt Benckiser Group. It trades about -0.22 of its total potential returns per unit of risk. Reckitt Benckiser Group is currently generating about 0.07 per unit of volatility. If you would invest 476,200 in Reckitt Benckiser Group on September 13, 2024 and sell it today you would earn a total of 7,300 from holding Reckitt Benckiser Group or generate 1.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Metals Holdings vs. Reckitt Benckiser Group
Performance |
| Timeline |
| European Metals Holdings |
| Reckitt Benckiser |
European Metals and Reckitt Benckiser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and Reckitt Benckiser
The main advantage of trading using opposite European Metals and Reckitt Benckiser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals position performs unexpectedly, Reckitt Benckiser 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 Reckitt Benckiser will offset losses from the drop in Reckitt Benckiser's long position.| European Metals vs. Givaudan SA | European Metals vs. Antofagasta PLC | European Metals vs. Ferrexpo PLC | European Metals vs. Atalaya Mining |
| Reckitt Benckiser vs. Samsung Electronics Co | Reckitt Benckiser vs. AMG Advanced Metallurgical | Reckitt Benckiser vs. Power Metal Resources | Reckitt Benckiser vs. European Metals Holdings |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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