Correlation Between ITALIAN WINE and Eurasia Mining

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

Diversification Opportunities for ITALIAN WINE and Eurasia Mining

-0.14
  Correlation Coefficient

Good diversification

The 3 months correlation between ITALIAN and Eurasia is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and Eurasia Mining Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eurasia Mining Plc and ITALIAN WINE 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 ITALIAN WINE BRANDS are associated (or correlated) with Eurasia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eurasia Mining Plc has no effect on the direction of ITALIAN WINE i.e., ITALIAN WINE and Eurasia Mining go up and down completely randomly.

Pair Corralation between ITALIAN WINE and Eurasia Mining

Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to under-perform the Eurasia Mining. But the stock apears to be less risky and, when comparing its historical volatility, ITALIAN WINE BRANDS is 3.24 times less risky than Eurasia Mining. The stock trades about -0.04 of its potential returns per unit of risk. The Eurasia Mining Plc is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1.80  in Eurasia Mining Plc on November 2, 2024 and sell it today you would earn a total of  0.60  from holding Eurasia Mining Plc or generate 33.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ITALIAN WINE BRANDS  vs.  Eurasia Mining Plc

 Performance 
       Timeline  
ITALIAN WINE BRANDS 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ITALIAN WINE BRANDS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ITALIAN WINE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Eurasia Mining Plc 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Eurasia Mining Plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Eurasia Mining reported solid returns over the last few months and may actually be approaching a breakup point.

ITALIAN WINE and Eurasia Mining Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ITALIAN WINE and Eurasia Mining

The main advantage of trading using opposite ITALIAN WINE and Eurasia Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITALIAN WINE position performs unexpectedly, Eurasia Mining 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 Eurasia Mining will offset losses from the drop in Eurasia Mining's long position.
The idea behind ITALIAN WINE BRANDS and Eurasia Mining 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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