Correlation Between Electra Battery and Pfizer

Can any of the company-specific risk be diversified away by investing in both Electra Battery and Pfizer 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 Pfizer 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 Pfizer Inc CDR, you can compare the effects of market volatilities on Electra Battery and Pfizer 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 Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electra Battery and Pfizer.

Diversification Opportunities for Electra Battery and Pfizer

0.75

Correlation Coefficient

Electra Battery  Pfizer

Poor diversification

The 3 months correlation between Electra and Pfizer is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials and Pfizer Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc CDR 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 Pfizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfizer Inc CDR has no effect on the direction of Electra Battery i.e., Electra Battery and Pfizer go up and down completely randomly.

Pair Corralation between Electra Battery and Pfizer

Assuming the 90 days trading horizon Electra Battery Materials is expected to under-perform the Pfizer. In addition to that, Electra Battery is 4.46 times more volatile than Pfizer Inc CDR. It trades about -0.02 of its total potential returns per unit of risk. Pfizer Inc CDR is currently generating about -0.07 per unit of volatility. If you would invest  2,135  in Pfizer Inc CDR on September 26, 2024 and sell it today you would lose (895.00) from holding Pfizer Inc CDR or give up 41.92% of portfolio value over 90 days.

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

Electra Battery Materials  vs.  Pfizer Inc CDR

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.

Pfizer Inc CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pfizer Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Electra Battery and Pfizer

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

The idea behind Electra Battery Materials and Pfizer Inc CDR 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.