Correlation Between Electra Battery and Largo Resources
Can any of the company-specific risk be diversified away by investing in both Electra Battery and Largo 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 Electra Battery and Largo Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electra Battery Materials and Largo Resources, you can compare the effects of market volatilities on Electra Battery and Largo 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 Electra Battery with a short position of Largo Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electra Battery and Largo Resources.
Diversification Opportunities for Electra Battery and Largo Resources
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Electra and Largo is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials and Largo Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Largo Resources and Electra 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 Electra Battery Materials are associated (or correlated) with Largo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Largo Resources has no effect on the direction of Electra Battery i.e., Electra Battery and Largo Resources go up and down completely randomly.
Pair Corralation between Electra Battery and Largo Resources
Given the investment horizon of 90 days Electra Battery Materials is expected to generate 1.69 times more return on investment than Largo Resources. However, Electra Battery is 1.69 times more volatile than Largo Resources. It trades about -0.02 of its potential returns per unit of risk. Largo Resources is currently generating about -0.04 per unit of risk. If you would invest 868.00 in Electra Battery Materials on November 8, 2024 and sell it today you would lose (712.00) from holding Electra Battery Materials or give up 82.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electra Battery Materials vs. Largo Resources
Performance |
| Timeline |
| Electra Battery Materials |
| Largo Resources |
Electra Battery and Largo Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electra Battery and Largo Resources
The main advantage of trading using opposite Electra Battery and Largo Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electra Battery position performs unexpectedly, Largo 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 Largo Resources will offset losses from the drop in Largo Resources' long position.| Electra Battery vs. Cobalt Blue Holdings | Electra Battery vs. Bradda Head Lithium | Electra Battery vs. ioneer | Electra Battery vs. Tearlach Resources Limited |
| Largo Resources vs. Skeena Resources | Largo Resources vs. Materion | Largo Resources vs. Compass Minerals International | Largo Resources vs. IperionX Limited American |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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