Correlation Between Latin Resources and European Metals
Can any of the company-specific risk be diversified away by investing in both Latin Resources 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 Latin Resources and European Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Latin Resources Limited and European Metals Holdings, you can compare the effects of market volatilities on Latin Resources 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 Latin Resources with a short position of European Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Latin Resources and European Metals.
Diversification Opportunities for Latin Resources and European Metals
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Latin and European is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Latin Resources Limited 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 Latin Resources 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 Latin Resources Limited 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 Latin Resources i.e., Latin Resources and European Metals go up and down completely randomly.
Pair Corralation between Latin Resources and European Metals
Assuming the 90 days horizon Latin Resources Limited is expected to generate 0.23 times more return on investment than European Metals. However, Latin Resources Limited is 4.33 times less risky than European Metals. It trades about 0.21 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.02 per unit of risk. 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 Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Latin Resources Limited vs. European Metals Holdings
Performance |
| Timeline |
| Latin Resources |
| European Metals Holdings |
Latin Resources and European Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Latin Resources and European Metals
The main advantage of trading using opposite Latin Resources and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Latin Resources 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.| Latin Resources vs. Copa Holdings SA | Latin Resources vs. United Airlines Holdings | Latin Resources vs. Delta Air Lines | Latin Resources vs. SkyWest |
| European Metals vs. Aurelia Metals Limited | European Metals vs. Centaurus Metals Limited | European Metals vs. Artemis Resources | European Metals vs. Ascendant Resources |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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