Correlation Between Europa Metals and Kumba Iron
Can any of the company-specific risk be diversified away by investing in both Europa Metals and Kumba Iron 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 Europa Metals and Kumba Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Europa Metals and Kumba Iron Ore, you can compare the effects of market volatilities on Europa Metals and Kumba Iron 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 Europa Metals with a short position of Kumba Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europa Metals and Kumba Iron.
Diversification Opportunities for Europa Metals and Kumba Iron
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Europa and Kumba is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Europa Metals and Kumba Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumba Iron Ore and Europa 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 Europa Metals are associated (or correlated) with Kumba Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumba Iron Ore has no effect on the direction of Europa Metals i.e., Europa Metals and Kumba Iron go up and down completely randomly.
Pair Corralation between Europa Metals and Kumba Iron
Assuming the 90 days trading horizon Europa Metals is expected to generate 3.2 times more return on investment than Kumba Iron. However, Europa Metals is 3.2 times more volatile than Kumba Iron Ore. It trades about 0.03 of its potential returns per unit of risk. Kumba Iron Ore is currently generating about -0.01 per unit of risk. If you would invest 8,000 in Europa Metals on September 5, 2024 and sell it today you would lose (3,000) from holding Europa Metals or give up 37.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Europa Metals vs. Kumba Iron Ore
Performance |
| Timeline |
| Europa Metals |
| Kumba Iron Ore |
Europa Metals and Kumba Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Europa Metals and Kumba Iron
The main advantage of trading using opposite Europa Metals and Kumba Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europa Metals position performs unexpectedly, Kumba Iron 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 Kumba Iron will offset losses from the drop in Kumba Iron's long position.| Europa Metals vs. Glencore PLC | Europa Metals vs. Anglo American PLC | Europa Metals vs. African Rainbow Minerals | Europa Metals vs. Jubilee Platinum |
| Kumba Iron vs. RCL Foods | Kumba Iron vs. Astoria Investments | Kumba Iron vs. Europa Metals | Kumba Iron vs. Standard Bank Group |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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