Correlation Between Arbor Metals and Electra Battery

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

By analyzing existing cross correlation between Arbor Metals Corp and Electra Battery Materials, you can compare the effects of market volatilities on Arbor Metals and Electra Battery 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 Arbor Metals with a short position of Electra Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbor Metals and Electra Battery.

Diversification Opportunities for Arbor Metals and Electra Battery

0.89

Correlation Coefficient

Arbor Metals  Electra Battery

Very poor diversification

The 3 months correlation between Arbor and Electra is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Metals Corp and Electra Battery Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electra Battery Materials and Arbor 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 Arbor Metals Corp are associated (or correlated) with Electra Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electra Battery Materials has no effect on the direction of Arbor Metals i.e., Arbor Metals and Electra Battery go up and down completely randomly.

Pair Corralation between Arbor Metals and Electra Battery

Assuming the 90 days horizon Arbor Metals Corp is expected to generate 0.96 times more return on investment than Electra Battery. However, Arbor Metals Corp is 1.04 times less risky than Electra Battery. It trades about -0.2 of its potential returns per unit of risk. Electra Battery Materials is currently generating about -0.22 per unit of risk. If you would invest  38.00  in Arbor Metals Corp on September 21, 2024 and sell it today you would lose (13.00) from holding Arbor Metals Corp or give up 34.21% of portfolio value over 90 days.

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

Arbor Metals Corp  vs.  Electra Battery Materials

Arbor Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arbor Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Electra Battery Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electra Battery Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Arbor Metals and Electra Battery

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

The idea behind Arbor Metals Corp and Electra Battery Materials 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.