Correlation Between Electra Battery and EMX Royalty

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

Diversification Opportunities for Electra Battery and EMX Royalty

0.42

Correlation Coefficient

Electra Battery  EMX Royalty

Very weak diversification

The 3 months correlation between Electra and EMX is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials and EMX Royalty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMX Royalty Corp 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 EMX Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMX Royalty Corp has no effect on the direction of Electra Battery i.e., Electra Battery and EMX Royalty go up and down completely randomly.

Pair Corralation between Electra Battery and EMX Royalty

Given the investment horizon of 90 days Electra Battery Materials is expected to under-perform the EMX Royalty. In addition to that, Electra Battery is 2.35 times more volatile than EMX Royalty Corp. It trades about -0.21 of its total potential returns per unit of risk. EMX Royalty Corp is currently generating about 0.1 per unit of volatility. If you would invest  170.00  in EMX Royalty Corp on September 14, 2024 and sell it today you would earn a total of  5.00  from holding EMX Royalty Corp or generate 2.94% return on investment over 90 days.

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

Electra Battery Materials  vs.  EMX Royalty Corp

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.

EMX Royalty Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EMX Royalty Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, EMX Royalty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Electra Battery and EMX Royalty

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

The idea behind Electra Battery Materials and EMX Royalty Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.