Correlation Between Neo Battery and First Majestic

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

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

Diversification Opportunities for Neo Battery and First Majestic

0.44

Correlation Coefficient

Neo Battery  First Majestic

Very weak diversification

The 3 months correlation between Neo and First is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Neo Battery Materials and First Majestic Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Majestic Silver and Neo 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 Neo Battery Materials are associated (or correlated) with First Majestic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Majestic Silver has no effect on the direction of Neo Battery i.e., Neo Battery and First Majestic go up and down completely randomly.

Pair Corralation between Neo Battery and First Majestic

Assuming the 90 days horizon Neo Battery Materials is expected to generate 3.09 times more return on investment than First Majestic. However, Neo Battery is 3.09 times more volatile than First Majestic Silver. It trades about 0.32 of its potential returns per unit of risk. First Majestic Silver is currently generating about 0.14 per unit of risk. If you would invest  11.00  in Neo Battery Materials on September 5, 2024 and sell it today you would earn a total of  70.00  from holding Neo Battery Materials or generate 636.36% return on investment over 90 days.

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

Neo Battery Materials  vs.  First Majestic Silver

Neo Battery Materials

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Neo Battery Materials are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Neo Battery showed solid returns over the last few months and may actually be approaching a breakup point.

First Majestic Silver

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, First Majestic displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Neo Battery and First Majestic

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

The idea behind Neo Battery Materials and First Majestic Silver 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.