Correlation Between American Battery and Ardea Resources

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

By analyzing existing cross correlation between American Battery Metals and Ardea Resources Limited, you can compare the effects of market volatilities on American Battery and Ardea Resources 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 Ardea Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Battery and Ardea Resources.

Diversification Opportunities for American Battery and Ardea Resources

0.53

Correlation Coefficient

American Battery  Ardea Resources

Very weak diversification

The 3 months correlation between American and Ardea is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding American Battery Metals and Ardea Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardea Resources 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 Metals are associated (or correlated) with Ardea Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardea Resources has no effect on the direction of American Battery i.e., American Battery and Ardea Resources go up and down completely randomly.

Pair Corralation between American Battery and Ardea Resources

Given the investment horizon of 90 days American Battery Metals is expected to generate 0.91 times more return on investment than Ardea Resources. However, American Battery Metals is 1.1 times less risky than Ardea Resources. It trades about 0.06 of its potential returns per unit of risk. Ardea Resources Limited is currently generating about -0.01 per unit of risk. If you would invest  53.00  in American Battery Metals on September 4, 2024 and sell it today you would earn a total of  15.00  from holding American Battery Metals or generate 28.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	30.71%
Values	Daily Returns

American Battery Metals  vs.  Ardea Resources Limited

American Battery Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Battery Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, American Battery is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Ardea Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardea Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with American Battery and Ardea Resources

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

The idea behind American Battery Metals and Ardea Resources Limited 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.