Correlation Between Power Metal and European Metals
Can any of the company-specific risk be diversified away by investing in both Power Metal 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 Power Metal and European Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Metal Resources and European Metals Holdings, you can compare the effects of market volatilities on Power Metal 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 Power Metal with a short position of European Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Metal and European Metals.
Diversification Opportunities for Power Metal and European Metals
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Power and European is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Power Metal Resources 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 Power Metal 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 Power Metal Resources 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 Power Metal i.e., Power Metal and European Metals go up and down completely randomly.
Pair Corralation between Power Metal and European Metals
Assuming the 90 days trading horizon Power Metal Resources is expected to generate 0.87 times more return on investment than European Metals. However, Power Metal Resources is 1.16 times less risky than European Metals. It trades about 0.0 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.06 per unit of risk. If you would invest 1,700 in Power Metal Resources on August 27, 2024 and sell it today you would lose (200.00) from holding Power Metal Resources or give up 11.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power Metal Resources vs. European Metals Holdings
Performance |
| Timeline |
| Power Metal Resources |
| European Metals Holdings |
Power Metal and European Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Metal and European Metals
The main advantage of trading using opposite Power Metal and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Metal 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.| Power Metal vs. Givaudan SA | Power Metal vs. Antofagasta PLC | Power Metal vs. Centamin PLC | Power Metal vs. Atalaya Mining |
| European Metals vs. G5 Entertainment AB | European Metals vs. Centaur Media | European Metals vs. Atalaya Mining | European Metals vs. Flutter Entertainment PLC |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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