Correlation Between European Metals and Latin Resources

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Can any of the company-specific risk be diversified away by investing in both European Metals and Latin Resources 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 Latin Resources 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 Latin Resources Limited, you can compare the effects of market volatilities on European Metals and Latin Resources 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 Latin Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Latin Resources.

Diversification Opportunities for European Metals and Latin Resources

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between European and Latin is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Latin Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latin Resources 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 Latin Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latin Resources has no effect on the direction of European Metals i.e., European Metals and Latin Resources go up and down completely randomly.

Pair Corralation between European Metals and Latin Resources

Assuming the 90 days horizon European Metals Holdings is expected to under-perform the Latin Resources. In addition to that, European Metals is 4.33 times more volatile than Latin Resources Limited. It trades about -0.02 of its total potential returns per unit of risk. Latin Resources Limited is currently generating about 0.21 per unit of volatility. If you would invest  12.00  in Latin Resources Limited on August 25, 2024 and sell it today you would earn a total of  1.00  from holding Latin Resources Limited or generate 8.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

European Metals Holdings  vs.  Latin Resources Limited

 Performance 
       Timeline  
European Metals Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days European Metals Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Latin Resources 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Latin Resources Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Latin Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

European Metals and Latin Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with European Metals and Latin Resources

The main advantage of trading using opposite European Metals and Latin Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals position performs unexpectedly, Latin Resources 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 Latin Resources will offset losses from the drop in Latin Resources' long position.
The idea behind European Metals Holdings and Latin Resources Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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