Correlation Between China Molybdenum and Electra Battery

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

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

Diversification Opportunities for China Molybdenum and Electra Battery

0.74

Correlation Coefficient

China Molybdenum  Electra Battery

Poor diversification

The 3 months correlation between China and Electra is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding China Molybdenum Co 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 China Molybdenum 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 China Molybdenum Co 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 China Molybdenum i.e., China Molybdenum and Electra Battery go up and down completely randomly.

Pair Corralation between China Molybdenum and Electra Battery

Assuming the 90 days horizon China Molybdenum Co is expected to generate 1.28 times more return on investment than Electra Battery. However, China Molybdenum is 1.28 times more volatile than Electra Battery Materials. It trades about -0.08 of its potential returns per unit of risk. Electra Battery Materials is currently generating about -0.21 per unit of risk. If you would invest  86.00  in China Molybdenum Co on September 22, 2024 and sell it today you would lose (21.00) from holding China Molybdenum Co or give up 24.42% of portfolio value over 90 days.

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

China Molybdenum Co  vs.  Electra Battery Materials

China Molybdenum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Molybdenum Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 fragile performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with China Molybdenum and Electra Battery

The main advantage of trading using opposite China Molybdenum and Electra Battery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Molybdenum 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 China Molybdenum Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.