Correlation Between Electra Battery and Solitario Exploration

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

Diversification Opportunities for Electra Battery and Solitario Exploration

-0.38

Correlation Coefficient

Electra Battery  Solitario Exploration

Very good diversification

The 3 months correlation between Electra and Solitario is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials and Solitario Exploration Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solitario Exploration 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 Solitario Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solitario Exploration has no effect on the direction of Electra Battery i.e., Electra Battery and Solitario Exploration go up and down completely randomly.

Pair Corralation between Electra Battery and Solitario Exploration

Given the investment horizon of 90 days Electra Battery Materials is expected to under-perform the Solitario Exploration. In addition to that, Electra Battery is 1.53 times more volatile than Solitario Exploration Royalty. It trades about -0.01 of its total potential returns per unit of risk. Solitario Exploration Royalty is currently generating about 0.06 per unit of volatility. If you would invest  61.00  in Solitario Exploration Royalty on November 28, 2024 and sell it today you would earn a total of  5.97  from holding Solitario Exploration Royalty or generate 9.79% return on investment over 90 days.

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

Electra Battery Materials  vs.  Solitario Exploration Royalty

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 very healthy fundamental drivers, Electra Battery is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Solitario Exploration

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Solitario Exploration Royalty are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Solitario Exploration disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electra Battery and Solitario Exploration

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

The idea behind Electra Battery Materials and Solitario Exploration Royalty 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.