Correlation Between Battery Minerals and Ultra Resources

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Can any of the company-specific risk be diversified away by investing in both Battery Minerals and Ultra Resources 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 Battery Minerals and Ultra Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Battery Minerals Limited and Ultra Resources, you can compare the effects of market volatilities on Battery Minerals and Ultra Resources 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 Battery Minerals with a short position of Ultra Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Battery Minerals and Ultra Resources.

Diversification Opportunities for Battery Minerals and Ultra Resources

0.15
  Correlation Coefficient

Average diversification

The 3 months correlation between Battery and Ultra is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Battery Minerals Limited and Ultra Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Resources and Battery Minerals 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 Battery Minerals Limited are associated (or correlated) with Ultra Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Resources has no effect on the direction of Battery Minerals i.e., Battery Minerals and Ultra Resources go up and down completely randomly.

Pair Corralation between Battery Minerals and Ultra Resources

Assuming the 90 days horizon Battery Minerals is expected to generate 1.88 times less return on investment than Ultra Resources. But when comparing it to its historical volatility, Battery Minerals Limited is 1.82 times less risky than Ultra Resources. It trades about 0.08 of its potential returns per unit of risk. Ultra Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Ultra Resources on September 3, 2024 and sell it today you would lose (1.00) from holding Ultra Resources or give up 50.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Battery Minerals Limited  vs.  Ultra Resources

 Performance 
       Timeline  
Battery Minerals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Battery Minerals Limited 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.
Ultra Resources 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ultra Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Battery Minerals and Ultra Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Battery Minerals and Ultra Resources

The main advantage of trading using opposite Battery Minerals and Ultra Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Battery Minerals position performs unexpectedly, Ultra Resources 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 Ultra Resources will offset losses from the drop in Ultra Resources' long position.
The idea behind Battery Minerals Limited and Ultra 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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