Correlation Between European Metals and Critical Metals

Can any of the company-specific risk be diversified away by investing in both European Metals and Critical 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 European Metals and Critical Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between European Metals Holdings and Critical Metals Plc, you can compare the effects of market volatilities on European Metals and Critical 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 European Metals with a short position of Critical Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Critical Metals.

Diversification Opportunities for European Metals and Critical Metals

0.72

Correlation Coefficient

European Metals  Critical Metals

Poor diversification

The 3 months correlation between European and Critical is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Critical Metals Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Critical Metals Plc and European Metals 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 European Metals Holdings are associated (or correlated) with Critical Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Critical Metals Plc has no effect on the direction of European Metals i.e., European Metals and Critical Metals go up and down completely randomly.

Pair Corralation between European Metals and Critical Metals

Assuming the 90 days trading horizon European Metals Holdings is expected to generate 0.46 times more return on investment than Critical Metals. However, European Metals Holdings is 2.17 times less risky than Critical Metals. It trades about -0.18 of its potential returns per unit of risk. Critical Metals Plc is currently generating about -0.13 per unit of risk. If you would invest  1,150  in European Metals Holdings on April 20, 2025 and sell it today you would lose (375.00) from holding European Metals Holdings or give up 32.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

European Metals Holdings  vs.  Critical Metals Plc

European Metals Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days European Metals Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in August 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Critical Metals Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Critical Metals Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in August 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with European Metals and Critical Metals

The main advantage of trading using opposite European Metals and Critical Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals position performs unexpectedly, Critical 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 Critical Metals will offset losses from the drop in Critical Metals' long position.

The idea behind European Metals Holdings and Critical Metals 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.