Correlation Between Electra Battery and Trilogy Metals

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

Diversification Opportunities for Electra Battery and Trilogy Metals

-0.74
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Electra and Trilogy is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials and Trilogy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trilogy Metals 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 Trilogy Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trilogy Metals has no effect on the direction of Electra Battery i.e., Electra Battery and Trilogy Metals go up and down completely randomly.

Pair Corralation between Electra Battery and Trilogy Metals

Given the investment horizon of 90 days Electra Battery Materials is expected to under-perform the Trilogy Metals. But the stock apears to be less risky and, when comparing its historical volatility, Electra Battery Materials is 2.62 times less risky than Trilogy Metals. The stock trades about -0.07 of its potential returns per unit of risk. The Trilogy Metals is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  52.00  in Trilogy Metals on September 3, 2024 and sell it today you would earn a total of  71.00  from holding Trilogy Metals or generate 136.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Electra Battery Materials  vs.  Trilogy Metals

 Performance 
       Timeline  
Electra Battery Materials 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
Trilogy Metals 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Trilogy Metals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Trilogy Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Electra Battery and Trilogy Metals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Electra Battery and Trilogy Metals

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

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