Correlation Between Surge Battery and Patriot Battery

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

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

Diversification Opportunities for Surge Battery and Patriot Battery

0.21

Correlation Coefficient

Surge Battery  Patriot Battery

Modest diversification

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

Pair Corralation between Surge Battery and Patriot Battery

Assuming the 90 days horizon Surge Battery Metals is expected to generate 0.94 times more return on investment than Patriot Battery. However, Surge Battery Metals is 1.06 times less risky than Patriot Battery. It trades about 0.01 of its potential returns per unit of risk. Patriot Battery Metals is currently generating about -0.05 per unit of risk. If you would invest  25.00  in Surge Battery Metals on September 11, 2024 and sell it today you would lose (1.00) from holding Surge Battery Metals or give up 4.0% of portfolio value over 90 days.

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

Surge Battery Metals  vs.  Patriot Battery Metals

Surge Battery Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Surge Battery Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Surge Battery is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Patriot Battery Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Patriot Battery Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Surge Battery and Patriot Battery

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

The idea behind Surge Battery Metals and Patriot Battery Metals 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.