Correlation Between Electra Battery and MP Materials
Can any of the company-specific risk be diversified away by investing in both Electra Battery and MP Materials 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 MP Materials 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 MP Materials Corp, you can compare the effects of market volatilities on Electra Battery and MP Materials 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 MP Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electra Battery and MP Materials.
Diversification Opportunities for Electra Battery and MP Materials
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Electra and MP Materials is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials and MP Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MP Materials Corp 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 MP Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MP Materials Corp has no effect on the direction of Electra Battery i.e., Electra Battery and MP Materials go up and down completely randomly.
Pair Corralation between Electra Battery and MP Materials
Given the investment horizon of 90 days Electra Battery Materials is expected to under-perform the MP Materials. But the stock apears to be less risky and, when comparing its historical volatility, Electra Battery Materials is 1.0 times less risky than MP Materials. The stock trades about -0.11 of its potential returns per unit of risk. The MP Materials Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,888 in MP Materials Corp on August 27, 2024 and sell it today you would earn a total of 196.00 from holding MP Materials Corp or generate 10.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electra Battery Materials vs. MP Materials Corp
Performance |
| Timeline |
| Electra Battery Materials |
| MP Materials Corp |
Electra Battery and MP Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electra Battery and MP Materials
The main advantage of trading using opposite Electra Battery and MP Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electra Battery position performs unexpectedly, MP Materials 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 MP Materials will offset losses from the drop in MP Materials' long position.| Electra Battery vs. Vale SA ADR | Electra Battery vs. Teck Resources Ltd | Electra Battery vs. BHP Group Limited | Electra Battery vs. Glencore PLC ADR |
| MP Materials vs. Vale SA ADR | MP Materials vs. Teck Resources Ltd | MP Materials vs. BHP Group Limited | MP Materials vs. Glencore PLC ADR |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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