Correlation Between Global Battery and Copper Lake

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

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

Diversification Opportunities for Global Battery and Copper Lake

-0.3

Correlation Coefficient

Global Battery  Copper Lake

Very good diversification

The 3 months correlation between Global and Copper is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Global Battery Metals and Copper Lake Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copper Lake Resources and Global 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 Global Battery Metals are associated (or correlated) with Copper Lake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copper Lake Resources has no effect on the direction of Global Battery i.e., Global Battery and Copper Lake go up and down completely randomly.

Pair Corralation between Global Battery and Copper Lake

Assuming the 90 days horizon Global Battery is expected to generate 1.11 times less return on investment than Copper Lake. But when comparing it to its historical volatility, Global Battery Metals is 2.73 times less risky than Copper Lake. It trades about 0.11 of its potential returns per unit of risk. Copper Lake Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.68  in Copper Lake Resources on September 22, 2024 and sell it today you would lose (0.53) from holding Copper Lake Resources or give up 77.94% of portfolio value over 90 days.

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

Global Battery Metals  vs.  Copper Lake Resources

Global Battery Metals

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Battery Metals are ranked lower than 2 (%) 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.

Copper Lake Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Copper Lake Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Copper Lake reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Battery and Copper Lake

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

The idea behind Global Battery Metals and Copper Lake 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.