Correlation Between Highland Copper and Electra Battery

Can any of the company-specific risk be diversified away by investing in both Highland Copper and Electra Battery 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 Highland Copper and Electra Battery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Highland Copper and Electra Battery Materials, you can compare the effects of market volatilities on Highland Copper and Electra Battery 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 Highland Copper with a short position of Electra Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Copper and Electra Battery.

Diversification Opportunities for Highland Copper and Electra Battery

-0.22

Correlation Coefficient

Highland Copper  Electra Battery

Very good diversification

The 3 months correlation between Highland and Electra is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Highland Copper and Electra Battery Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electra Battery Materials and Highland Copper 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 Highland Copper are associated (or correlated) with Electra Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electra Battery Materials has no effect on the direction of Highland Copper i.e., Highland Copper and Electra Battery go up and down completely randomly.

Pair Corralation between Highland Copper and Electra Battery

Given the investment horizon of 90 days Highland Copper is expected to under-perform the Electra Battery. But the stock apears to be less risky and, when comparing its historical volatility, Highland Copper is 13.98 times less risky than Electra Battery. The stock trades about -0.14 of its potential returns per unit of risk. The Electra Battery Materials is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  62.00  in Electra Battery Materials on October 8, 2024 and sell it today you would earn a total of  199.00  from holding Electra Battery Materials or generate 320.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Highland Copper  vs.  Electra Battery Materials

Highland Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highland Copper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Electra Battery Materials

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Electra Battery Materials are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental drivers, Electra Battery showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Highland Copper and Electra Battery

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

The idea behind Highland Copper and Electra Battery Materials 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.