Correlation Between Puma Exploration and Global Battery

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

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

Diversification Opportunities for Puma Exploration and Global Battery

-0.12

Correlation Coefficient

Puma Exploration  Global Battery

Good diversification

The 3 months correlation between Puma and Global is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Puma Exploration and Global Battery Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Battery Metals and Puma Exploration 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 Puma Exploration are associated (or correlated) with Global Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Battery Metals has no effect on the direction of Puma Exploration i.e., Puma Exploration and Global Battery go up and down completely randomly.

Pair Corralation between Puma Exploration and Global Battery

Assuming the 90 days horizon Puma Exploration is expected to generate 10.1 times less return on investment than Global Battery. But when comparing it to its historical volatility, Puma Exploration is 1.63 times less risky than Global Battery. It trades about 0.01 of its potential returns per unit of risk. Global Battery Metals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2.12  in Global Battery Metals on September 22, 2024 and sell it today you would lose (0.30) from holding Global Battery Metals or give up 14.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.22%
Values	Daily Returns

Puma Exploration  vs.  Global Battery Metals

Puma Exploration

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Puma Exploration are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Puma Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Global Battery Metals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Battery Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Global Battery reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Puma Exploration and Global Battery

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

The idea behind Puma Exploration and Global Battery Metals 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.