Correlation Between European Metals and Critical Elements
Can any of the company-specific risk be diversified away by investing in both European Metals and Critical Elements 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 Critical Elements 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 Critical Elements, you can compare the effects of market volatilities on European Metals and Critical Elements 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 Critical Elements. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Critical Elements.
Diversification Opportunities for European Metals and Critical Elements
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between European and Critical is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Critical Elements in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Critical Elements 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 Critical Elements. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Critical Elements has no effect on the direction of European Metals i.e., European Metals and Critical Elements go up and down completely randomly.
Pair Corralation between European Metals and Critical Elements
Assuming the 90 days horizon European Metals is expected to generate 24.64 times less return on investment than Critical Elements. But when comparing it to its historical volatility, European Metals Holdings is 1.63 times less risky than Critical Elements. It trades about 0.03 of its potential returns per unit of risk. Critical Elements is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 24.00 in Critical Elements on December 1, 2024 and sell it today you would earn a total of 20.00 from holding Critical Elements or generate 83.33% 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. Critical Elements
Performance |
| Timeline |
| European Metals Holdings |
| Critical Elements |
European Metals and Critical Elements Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and Critical Elements
The main advantage of trading using opposite European Metals and Critical Elements positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals position performs unexpectedly, Critical Elements 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 Critical Elements will offset losses from the drop in Critical Elements' long position.| European Metals vs. BHP Group Limited | European Metals vs. Rio Tinto Group | European Metals vs. BHP Group Limited | European Metals vs. Rio Tinto Group |
| Critical Elements vs. Argosy Minerals Limited | Critical Elements vs. Aurelia Metals Limited | Critical Elements vs. Artemis Resources | Critical Elements vs. Ascendant Resources |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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