Correlation Between International Battery and Critical Elements

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

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

Diversification Opportunities for International Battery and Critical Elements

0.21

Correlation Coefficient

International Battery  Critical Elements

Modest diversification

The 3 months correlation between International and Critical is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding International Battery Metals and Critical Elements in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Critical Elements and International 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 International Battery Metals are associated (or correlated) with Critical Elements. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Critical Elements has no effect on the direction of International Battery i.e., International Battery and Critical Elements go up and down completely randomly.

Pair Corralation between International Battery and Critical Elements

Assuming the 90 days horizon International Battery Metals is expected to generate 2.72 times more return on investment than Critical Elements. However, International Battery is 2.72 times more volatile than Critical Elements. It trades about 0.12 of its potential returns per unit of risk. Critical Elements is currently generating about 0.17 per unit of risk. If you would invest  20.00  in International Battery Metals on December 3, 2024 and sell it today you would earn a total of  19.00  from holding International Battery Metals or generate 95.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

International Battery Metals  vs.  Critical Elements

International Battery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Battery Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, International Battery reported solid returns over the last few months and may actually be approaching a breakup point.

Critical Elements

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Critical Elements are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Critical Elements reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Battery and Critical Elements

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

The idea behind International Battery Metals and Critical Elements 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.