Correlation Between Leading Edge and Global Battery
Can any of the company-specific risk be diversified away by investing in both Leading Edge and Global 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 Leading Edge and Global Battery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leading Edge Materials and Global Battery Metals, you can compare the effects of market volatilities on Leading Edge and Global 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 Leading Edge with a short position of Global Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leading Edge and Global Battery.
Diversification Opportunities for Leading Edge and Global Battery
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Leading and Global is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and Global Battery Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Battery Metals and Leading Edge 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 Leading Edge Materials are associated (or correlated) with Global Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Battery Metals has no effect on the direction of Leading Edge i.e., Leading Edge and Global Battery go up and down completely randomly.
Pair Corralation between Leading Edge and Global Battery
Assuming the 90 days horizon Leading Edge Materials is expected to under-perform the Global Battery. But the otc stock apears to be less risky and, when comparing its historical volatility, Leading Edge Materials is 1.97 times less risky than Global Battery. The otc stock trades about -0.03 of its potential returns per unit of risk. The Global Battery Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1.62 in Global Battery Metals on September 1, 2024 and sell it today you would lose (0.15) from holding Global Battery Metals or give up 9.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Leading Edge Materials vs. Global Battery Metals
Performance |
| Timeline |
| Leading Edge Materials |
| Global Battery Metals |
Leading Edge and Global Battery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leading Edge and Global Battery
The main advantage of trading using opposite Leading Edge and Global Battery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leading Edge position performs unexpectedly, Global 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 Global Battery will offset losses from the drop in Global Battery's long position.| Leading Edge vs. South32 Limited | Leading Edge vs. NioCorp Developments Ltd | Leading Edge vs. HUMANA INC | Leading Edge vs. SCOR PK |
| Global Battery vs. South32 Limited | Global Battery vs. NioCorp Developments Ltd | Global Battery vs. HUMANA INC | Global Battery vs. SCOR PK |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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