Correlation Between Electra Battery and Lundin Gold

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

Diversification Opportunities for Electra Battery and Lundin Gold

-0.04

Correlation Coefficient

Electra Battery  Lundin Gold

Good diversification

The 3 months correlation between Electra and Lundin is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials and Lundin Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Gold 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 Lundin Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Gold has no effect on the direction of Electra Battery i.e., Electra Battery and Lundin Gold go up and down completely randomly.

Pair Corralation between Electra Battery and Lundin Gold

Assuming the 90 days trading horizon Electra Battery Materials is expected to generate 40.03 times more return on investment than Lundin Gold. However, Electra Battery is 40.03 times more volatile than Lundin Gold. It trades about 0.22 of its potential returns per unit of risk. Lundin Gold is currently generating about -0.21 per unit of risk. If you would invest  68.00  in Electra Battery Materials on October 6, 2024 and sell it today you would earn a total of  193.00  from holding Electra Battery Materials or generate 283.82% return on investment over 90 days.

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

Electra Battery Materials  vs.  Lundin Gold

Electra Battery Materials

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Electra Battery Materials are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental drivers, Electra Battery showed solid returns over the last few months and may actually be approaching a breakup point.

Lundin Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lundin Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Lundin Gold is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Electra Battery and Lundin Gold

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

The idea behind Electra Battery Materials and Lundin Gold 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.