Correlation Between Electra Battery and Rubicon Organics

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

Diversification Opportunities for Electra Battery and Rubicon Organics

0.36

Correlation Coefficient

Electra Battery  Rubicon Organics

Weak diversification

The 3 months correlation between Electra and Rubicon is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials and Rubicon Organics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rubicon Organics 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 Rubicon Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rubicon Organics has no effect on the direction of Electra Battery i.e., Electra Battery and Rubicon Organics go up and down completely randomly.

Pair Corralation between Electra Battery and Rubicon Organics

Assuming the 90 days trading horizon Electra Battery Materials is expected to under-perform the Rubicon Organics. In addition to that, Electra Battery is 1.07 times more volatile than Rubicon Organics. It trades about -0.02 of its total potential returns per unit of risk. Rubicon Organics is currently generating about 0.01 per unit of volatility. If you would invest  77.00  in Rubicon Organics on September 24, 2024 and sell it today you would lose (34.00) from holding Rubicon Organics or give up 44.16% of portfolio value over 90 days.

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

Electra Battery Materials  vs.  Rubicon Organics

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

Rubicon Organics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rubicon Organics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Rubicon Organics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Electra Battery and Rubicon Organics

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

The idea behind Electra Battery Materials and Rubicon Organics 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.