Correlation Between Europa Metals and Third Point

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

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

Diversification Opportunities for Europa Metals and Third Point

0.4

Correlation Coefficient

Europa Metals  Third Point

Very weak diversification

The 3 months correlation between Europa and Third is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Europa Metals and Third Point Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Point Investors and Europa 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 Europa Metals are associated (or correlated) with Third Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Point Investors has no effect on the direction of Europa Metals i.e., Europa Metals and Third Point go up and down completely randomly.

Pair Corralation between Europa Metals and Third Point

Assuming the 90 days trading horizon Europa Metals is expected to generate 3.78 times more return on investment than Third Point. However, Europa Metals is 3.78 times more volatile than Third Point Investors. It trades about 0.07 of its potential returns per unit of risk. Third Point Investors is currently generating about 0.08 per unit of risk. If you would invest  90.00  in Europa Metals on April 21, 2025 and sell it today you would earn a total of  12.00  from holding Europa Metals or generate 13.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Europa Metals  vs.  Third Point Investors

Europa Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Europa Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Europa Metals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Third Point Investors

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Third Point Investors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Third Point is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Europa Metals and Third Point

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

The idea behind Europa Metals and Third Point Investors 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.