Correlation Between Electra Battery and Canaf Investments

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

Diversification Opportunities for Electra Battery and Canaf Investments

0.16

Correlation Coefficient

Electra Battery  Canaf Investments

Average diversification

The 3 months correlation between Electra and Canaf is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials and Canaf Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaf Investments 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 Canaf Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canaf Investments has no effect on the direction of Electra Battery i.e., Electra Battery and Canaf Investments go up and down completely randomly.

Pair Corralation between Electra Battery and Canaf Investments

Assuming the 90 days trading horizon Electra Battery is expected to generate 2.77 times less return on investment than Canaf Investments. In addition to that, Electra Battery is 2.63 times more volatile than Canaf Investments. It trades about 0.03 of its total potential returns per unit of risk. Canaf Investments is currently generating about 0.23 per unit of volatility. If you would invest  27.00  in Canaf Investments on October 4, 2024 and sell it today you would earn a total of  4.00  from holding Canaf Investments or generate 14.81% return on investment over 90 days.

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

Electra Battery Materials  vs.  Canaf Investments

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 unfluctuating performance in the last few months, the Stock's fundamental drivers remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Canaf Investments

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canaf Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Canaf Investments showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electra Battery and Canaf Investments

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

The idea behind Electra Battery Materials and Canaf Investments 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.