Correlation Between First Energy and Euro Manganese

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

Diversification Opportunities for First Energy and Euro Manganese

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between First and Euro is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding First Energy Metals and Euro Manganese in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euro Manganese and First Energy 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 Energy Metals are associated (or correlated) with Euro Manganese. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euro Manganese has no effect on the direction of First Energy i.e., First Energy and Euro Manganese go up and down completely randomly.

Pair Corralation between First Energy and Euro Manganese

Assuming the 90 days horizon First Energy is expected to generate 3.54 times less return on investment than Euro Manganese. In addition to that, First Energy is 1.11 times more volatile than Euro Manganese. It trades about 0.0 of its total potential returns per unit of risk. Euro Manganese is currently generating about 0.02 per unit of volatility. If you would invest  4.60  in Euro Manganese on October 26, 2024 and sell it today you would lose (1.80) from holding Euro Manganese or give up 39.13% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

First Energy Metals  vs.  Euro Manganese

 Performance 
       Timeline  
First Energy Metals 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in First Energy Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, First Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Euro Manganese 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Euro Manganese has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

First Energy and Euro Manganese Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Energy and Euro Manganese

The main advantage of trading using opposite First Energy and Euro Manganese positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Energy position performs unexpectedly, Euro Manganese 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 Euro Manganese will offset losses from the drop in Euro Manganese's long position.
The idea behind First Energy Metals and Euro Manganese 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.
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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