Correlation Between Patriot Battery and Vulcan Energy

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

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

Diversification Opportunities for Patriot Battery and Vulcan Energy

-0.76

Correlation Coefficient

Patriot Battery  Vulcan Energy

Pay attention - limited upside

The 3 months correlation between Patriot and Vulcan is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Patriot Battery Metals and Vulcan Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Energy Resources and Patriot 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 Patriot Battery Metals are associated (or correlated) with Vulcan Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Energy Resources has no effect on the direction of Patriot Battery i.e., Patriot Battery and Vulcan Energy go up and down completely randomly.

Pair Corralation between Patriot Battery and Vulcan Energy

Assuming the 90 days horizon Patriot Battery Metals is expected to under-perform the Vulcan Energy. But the otc stock apears to be less risky and, when comparing its historical volatility, Patriot Battery Metals is 1.9 times less risky than Vulcan Energy. The otc stock trades about -0.07 of its potential returns per unit of risk. The Vulcan Energy Resources is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  239.00  in Vulcan Energy Resources on September 13, 2024 and sell it today you would earn a total of  189.00  from holding Vulcan Energy Resources or generate 79.08% return on investment over 90 days.

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

Patriot Battery Metals  vs.  Vulcan Energy Resources

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.

Vulcan Energy Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Energy Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vulcan Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Patriot Battery and Vulcan Energy

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

The idea behind Patriot Battery Metals and Vulcan Energy 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.

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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.