Correlation Between Electra Battery and Sylvamo Corp

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

Diversification Opportunities for Electra Battery and Sylvamo Corp

-0.53

Correlation Coefficient

Electra Battery  Sylvamo Corp

Excellent diversification

The 3 months correlation between Electra and Sylvamo is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials and Sylvamo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sylvamo 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 Sylvamo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sylvamo Corp has no effect on the direction of Electra Battery i.e., Electra Battery and Sylvamo Corp go up and down completely randomly.

Pair Corralation between Electra Battery and Sylvamo Corp

Given the investment horizon of 90 days Electra Battery Materials is expected to under-perform the Sylvamo Corp. In addition to that, Electra Battery is 1.4 times more volatile than Sylvamo Corp. It trades about -0.16 of its total potential returns per unit of risk. Sylvamo Corp is currently generating about 0.13 per unit of volatility. If you would invest  7,437  in Sylvamo Corp on September 12, 2024 and sell it today you would earn a total of  1,498  from holding Sylvamo Corp or generate 20.14% 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.  Sylvamo 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.

Sylvamo Corp

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Electra Battery and Sylvamo Corp

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

The idea behind Electra Battery Materials and Sylvamo 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.