Correlation Between Australian Strategic and Global Battery

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

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

Diversification Opportunities for Australian Strategic and Global Battery

-0.11

Correlation Coefficient

Australian Strategic  Global Battery

Good diversification

The 3 months correlation between Australian and Global is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Australian Strategic Materials and Global Battery Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Battery Metals and Australian Strategic 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 Australian Strategic Materials are associated (or correlated) with Global Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Battery Metals has no effect on the direction of Australian Strategic i.e., Australian Strategic and Global Battery go up and down completely randomly.

Pair Corralation between Australian Strategic and Global Battery

Assuming the 90 days horizon Australian Strategic Materials is expected to under-perform the Global Battery. But the pink sheet apears to be less risky and, when comparing its historical volatility, Australian Strategic Materials is 2.02 times less risky than Global Battery. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Global Battery Metals is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Global Battery Metals on September 12, 2024 and sell it today you would lose (9.92) from holding Global Battery Metals or give up 82.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.7%
Values	Daily Returns

Australian Strategic Materials  vs.  Global Battery Metals

Australian Strategic

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Strategic Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Australian Strategic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global Battery Metals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Battery Metals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Global Battery reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Australian Strategic and Global Battery

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

The idea behind Australian Strategic Materials and Global Battery Metals 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.