Correlation Between Plaza Retail and Electra Battery

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

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

Diversification Opportunities for Plaza Retail and Electra Battery

0.9

Correlation Coefficient

Plaza Retail  Electra Battery

Almost no diversification

The 3 months correlation between Plaza and Electra is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Plaza Retail REIT 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 Plaza Retail 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 Plaza Retail REIT 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 Plaza Retail i.e., Plaza Retail and Electra Battery go up and down completely randomly.

Pair Corralation between Plaza Retail and Electra Battery

Assuming the 90 days trading horizon Plaza Retail REIT is expected to generate 0.21 times more return on investment than Electra Battery. However, Plaza Retail REIT is 4.7 times less risky than Electra Battery. It trades about -0.23 of its potential returns per unit of risk. Electra Battery Materials is currently generating about -0.34 per unit of risk. If you would invest  374.00  in Plaza Retail REIT on September 26, 2024 and sell it today you would lose (13.00) from holding Plaza Retail REIT or give up 3.48% of portfolio value over 90 days.

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

Plaza Retail REIT  vs.  Electra Battery Materials

Plaza Retail REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plaza Retail REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Electra Battery Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electra Battery Materials 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 fundamental drivers remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Plaza Retail and Electra Battery

The main advantage of trading using opposite Plaza Retail and Electra Battery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plaza Retail 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 Plaza Retail REIT 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.