Correlation Between Electra Battery and Falcon Energy

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

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

Diversification Opportunities for Electra Battery and Falcon Energy

-0.33

Correlation Coefficient

Electra Battery  Falcon Energy

Very good diversification

The 3 months correlation between Electra and Falcon is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials and Falcon Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Energy Materials and Electra 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 Electra Battery Materials are associated (or correlated) with Falcon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Energy Materials has no effect on the direction of Electra Battery i.e., Electra Battery and Falcon Energy go up and down completely randomly.

Pair Corralation between Electra Battery and Falcon Energy

Assuming the 90 days trading horizon Electra Battery Materials is expected to under-perform the Falcon Energy. In addition to that, Electra Battery is 1.04 times more volatile than Falcon Energy Materials. It trades about -0.31 of its total potential returns per unit of risk. Falcon Energy Materials is currently generating about -0.28 per unit of volatility. If you would invest  89.00  in Falcon Energy Materials on September 20, 2024 and sell it today you would lose (15.00) from holding Falcon Energy Materials or give up 16.85% of portfolio value over 90 days.

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

Electra Battery Materials  vs.  Falcon Energy Materials

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 unfluctuating 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.

Falcon Energy Materials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Falcon Energy Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Falcon Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electra Battery and Falcon Energy

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

The idea behind Electra Battery Materials and Falcon Energy 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.