Correlation Between Electra Battery and Ramaco Resources

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

Diversification Opportunities for Electra Battery and Ramaco Resources

-0.58

Correlation Coefficient

Electra Battery  Ramaco Resources

Excellent diversification

The 3 months correlation between Electra and Ramaco is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials and Ramaco Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramaco Resources 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 Ramaco Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramaco Resources has no effect on the direction of Electra Battery i.e., Electra Battery and Ramaco Resources go up and down completely randomly.

Pair Corralation between Electra Battery and Ramaco Resources

Given the investment horizon of 90 days Electra Battery Materials is expected to under-perform the Ramaco Resources. But the stock apears to be less risky and, when comparing its historical volatility, Electra Battery Materials is 1.08 times less risky than Ramaco Resources. The stock trades about -0.16 of its potential returns per unit of risk. The Ramaco Resources is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,007  in Ramaco Resources on September 12, 2024 and sell it today you would earn a total of  268.00  from holding Ramaco Resources or generate 26.61% return on investment over 90 days.

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

Electra Battery Materials  vs.  Ramaco Resources

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.

Ramaco Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ramaco Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Ramaco Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electra Battery and Ramaco Resources

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

The idea behind Electra Battery Materials and Ramaco Resources 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.