Correlation Between Electra Battery and South Star

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

Diversification Opportunities for Electra Battery and South Star

0.28

Correlation Coefficient

Electra Battery  South Star

Modest diversification

The 3 months correlation between Electra and South is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials and South Star Battery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Star Battery 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 South Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Star Battery has no effect on the direction of Electra Battery i.e., Electra Battery and South Star go up and down completely randomly.

Pair Corralation between Electra Battery and South Star

Given the investment horizon of 90 days Electra Battery Materials is expected to under-perform the South Star. But the stock apears to be less risky and, when comparing its historical volatility, Electra Battery Materials is 1.66 times less risky than South Star. The stock trades about -0.19 of its potential returns per unit of risk. The South Star Battery is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  36.00  in South Star Battery on December 29, 2024 and sell it today you would lose (10.00) from holding South Star Battery or give up 27.78% 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.  South Star Battery

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.

South Star Battery

Risk-Adjusted Performance

Very Weak

Over the last 90 days South Star Battery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Electra Battery and South Star

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

The idea behind Electra Battery Materials and South Star Battery 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..