Correlation Between Neo Battery and Red Moon

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

Diversification Opportunities for Neo Battery and Red Moon

-0.85

Correlation Coefficient

Neo Battery  Red Moon

Pay attention - limited upside

The 3 months correlation between Neo and Red is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Neo Battery Materials and Red Moon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Moon Resources 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 Red Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Moon Resources has no effect on the direction of Neo Battery i.e., Neo Battery and Red Moon go up and down completely randomly.

Pair Corralation between Neo Battery and Red Moon

Assuming the 90 days horizon Neo Battery Materials is expected to generate 16.65 times more return on investment than Red Moon. However, Neo Battery is 16.65 times more volatile than Red Moon Resources. It trades about 0.21 of its potential returns per unit of risk. Red Moon Resources is currently generating about -0.08 per unit of risk. If you would invest  5.00  in Neo Battery Materials on September 13, 2024 and sell it today you would earn a total of  45.00  from holding Neo Battery Materials or generate 900.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Neo Battery Materials  vs.  Red Moon Resources

Neo Battery Materials

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Neo Battery Materials are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Neo Battery reported solid returns over the last few months and may actually be approaching a breakup point.

Red Moon Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Moon Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Neo Battery and Red Moon

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

The idea behind Neo Battery Materials and Red Moon Resources 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.