Correlation Between First and European Metals
Can any of the company-specific risk be diversified away by investing in both First and European Metals 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 First and European Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Class Metals and European Metals Holdings, you can compare the effects of market volatilities on First and European Metals 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 First with a short position of European Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of First and European Metals.
Diversification Opportunities for First and European Metals
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and European is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding First Class Metals and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings and First 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 First Class Metals are associated (or correlated) with European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of First i.e., First and European Metals go up and down completely randomly.
Pair Corralation between First and European Metals
Assuming the 90 days trading horizon First Class Metals is expected to generate 1.21 times more return on investment than European Metals. However, First is 1.21 times more volatile than European Metals Holdings. It trades about -0.06 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.08 per unit of risk. If you would invest 715.00 in First Class Metals on October 11, 2024 and sell it today you would lose (530.00) from holding First Class Metals or give up 74.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Class Metals vs. European Metals Holdings
Performance |
| Timeline |
| First Class Metals |
| European Metals Holdings |
First and European Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First and European Metals
The main advantage of trading using opposite First and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First position performs unexpectedly, European Metals 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 European Metals will offset losses from the drop in European Metals' long position.The idea behind First Class Metals and European Metals Holdings 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.| European Metals vs. Tyson Foods Cl | European Metals vs. Datagroup SE | European Metals vs. First Class Metals | European Metals vs. Dairy Farm International |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |