Correlation Between Europa Metals and EasyJet PLC

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Can any of the company-specific risk be diversified away by investing in both Europa Metals and EasyJet PLC 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 EasyJet PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Europa Metals and EasyJet PLC, you can compare the effects of market volatilities on Europa Metals and EasyJet PLC 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 EasyJet PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europa Metals and EasyJet PLC.

Diversification Opportunities for Europa Metals and EasyJet PLC

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Europa and EasyJet is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Europa Metals and EasyJet PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EasyJet PLC 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 EasyJet PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EasyJet PLC has no effect on the direction of Europa Metals i.e., Europa Metals and EasyJet PLC go up and down completely randomly.

Pair Corralation between Europa Metals and EasyJet PLC

Assuming the 90 days trading horizon Europa Metals is expected to under-perform the EasyJet PLC. In addition to that, Europa Metals is 1.4 times more volatile than EasyJet PLC. It trades about -0.01 of its total potential returns per unit of risk. EasyJet PLC is currently generating about 0.06 per unit of volatility. If you would invest  32,733  in EasyJet PLC on September 23, 2024 and sell it today you would earn a total of  24,427  from holding EasyJet PLC or generate 74.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Europa Metals  vs.  EasyJet PLC

 Performance 
       Timeline  
Europa Metals 

Risk-Adjusted Performance

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Over the last 90 days Europa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Europa Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
EasyJet PLC 

Risk-Adjusted Performance

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Weak
 
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OK
Compared to the overall equity markets, risk-adjusted returns on investments in EasyJet PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, EasyJet PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Europa Metals and EasyJet PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Europa Metals and EasyJet PLC

The main advantage of trading using opposite Europa Metals and EasyJet PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europa Metals position performs unexpectedly, EasyJet PLC 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 EasyJet PLC will offset losses from the drop in EasyJet PLC's long position.
The idea behind Europa Metals and EasyJet PLC 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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