Correlation Between American Battery and MP Materials

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

Diversification Opportunities for American Battery and MP Materials

-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between American and MP Materials is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding American Battery Technology and MP Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MP Materials Corp and American Battery 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 American Battery Technology are associated (or correlated) with MP Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MP Materials Corp has no effect on the direction of American Battery i.e., American Battery and MP Materials go up and down completely randomly.

Pair Corralation between American Battery and MP Materials

Given the investment horizon of 90 days American Battery Technology is expected to generate 1.47 times more return on investment than MP Materials. However, American Battery is 1.47 times more volatile than MP Materials Corp. It trades about 0.03 of its potential returns per unit of risk. MP Materials Corp is currently generating about 0.04 per unit of risk. If you would invest  98.00  in American Battery Technology on September 14, 2024 and sell it today you would earn a total of  0.00  from holding American Battery Technology or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

American Battery Technology  vs.  MP Materials Corp

 Performance 
       Timeline  
American Battery Tec 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in American Battery Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, American Battery is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
MP Materials Corp 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in MP Materials Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, MP Materials reported solid returns over the last few months and may actually be approaching a breakup point.

American Battery and MP Materials Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Battery and MP Materials

The main advantage of trading using opposite American Battery and MP Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Battery position performs unexpectedly, MP Materials 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 MP Materials will offset losses from the drop in MP Materials' long position.
The idea behind American Battery Technology and MP Materials Corp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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