Correlation Between Electra Battery and IperionX Limited

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

Diversification Opportunities for Electra Battery and IperionX Limited

0.78

Correlation Coefficient

Electra Battery  IperionX Limited

Poor diversification

The 3 months correlation between Electra and IperionX is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials and IperionX Limited American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IperionX Limited American 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 IperionX Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IperionX Limited American has no effect on the direction of Electra Battery i.e., Electra Battery and IperionX Limited go up and down completely randomly.

Pair Corralation between Electra Battery and IperionX Limited

Given the investment horizon of 90 days Electra Battery Materials is expected to generate 1.17 times more return on investment than IperionX Limited. However, Electra Battery is 1.17 times more volatile than IperionX Limited American. It trades about -0.21 of its potential returns per unit of risk. IperionX Limited American is currently generating about -0.27 per unit of risk. If you would invest  222.00  in Electra Battery Materials on December 29, 2024 and sell it today you would lose (113.00) from holding Electra Battery Materials or give up 50.9% of portfolio value over 90 days.

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

Electra Battery Materials  vs.  IperionX Limited American

Electra Battery Materials

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

IperionX Limited American

Risk-Adjusted Performance

Very Weak

Over the last 90 days IperionX Limited American has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Electra Battery and IperionX Limited

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

The idea behind Electra Battery Materials and IperionX Limited American 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.