Correlation Between Electra Battery and US GoldMining

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

Diversification Opportunities for Electra Battery and US GoldMining

0.28

Correlation Coefficient

Electra Battery  US GoldMining

Modest diversification

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

Pair Corralation between Electra Battery and US GoldMining

Given the investment horizon of 90 days Electra Battery Materials is expected to under-perform the US GoldMining. In addition to that, Electra Battery is 1.0 times more volatile than US GoldMining Common. It trades about -0.04 of its total potential returns per unit of risk. US GoldMining Common is currently generating about 0.0 per unit of volatility. If you would invest  1,212  in US GoldMining Common on November 28, 2024 and sell it today you would lose (87.00) from holding US GoldMining Common or give up 7.18% 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.  US GoldMining Common

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 March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

US GoldMining Common

Risk-Adjusted Performance

Very Weak

Over the last 90 days US GoldMining Common has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, US GoldMining is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Electra Battery and US GoldMining

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

The idea behind Electra Battery Materials and US GoldMining Common 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.