Correlation Between MP Materials and Electra Battery
Can any of the company-specific risk be diversified away by investing in both MP Materials and Electra 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 MP Materials and Electra Battery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MP Materials Corp and Electra Battery Materials, you can compare the effects of market volatilities on MP Materials and Electra 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 MP Materials with a short position of Electra Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of MP Materials and Electra Battery.
Diversification Opportunities for MP Materials and Electra Battery
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MP Materials and Electra is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding MP Materials Corp and Electra Battery Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electra Battery Materials and MP Materials 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 MP Materials Corp are associated (or correlated) with Electra Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electra Battery Materials has no effect on the direction of MP Materials i.e., MP Materials and Electra Battery go up and down completely randomly.
Pair Corralation between MP Materials and Electra Battery
Allowing for the 90-day total investment horizon MP Materials Corp is expected to generate 0.92 times more return on investment than Electra Battery. However, MP Materials Corp is 1.08 times less risky than Electra Battery. It trades about 0.1 of its potential returns per unit of risk. Electra Battery Materials is currently generating about -0.16 per unit of risk. If you would invest 1,864 in MP Materials Corp on August 26, 2024 and sell it today you would earn a total of 100.00 from holding MP Materials Corp or generate 5.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MP Materials Corp vs. Electra Battery Materials
Performance |
| Timeline |
| MP Materials Corp |
| Electra Battery Materials |
MP Materials and Electra Battery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MP Materials and Electra Battery
The main advantage of trading using opposite MP Materials and Electra Battery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MP Materials position performs unexpectedly, Electra 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 Electra Battery will offset losses from the drop in Electra Battery's long position.| MP Materials vs. Piedmont Lithium Ltd | MP Materials vs. Sigma Lithium Resources | MP Materials vs. Standard Lithium | MP Materials vs. Vale SA ADR |
| Electra Battery vs. Vale SA ADR | Electra Battery vs. Teck Resources Ltd | Electra Battery vs. MP Materials Corp | Electra Battery vs. BHP Group Limited |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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