Correlation Between Patriot Battery and American West
Can any of the company-specific risk be diversified away by investing in both Patriot Battery and American West 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 Patriot Battery and American West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Patriot Battery Metals and American West Metals, you can compare the effects of market volatilities on Patriot Battery and American West 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 Patriot Battery with a short position of American West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patriot Battery and American West.
Diversification Opportunities for Patriot Battery and American West
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Patriot and American is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Patriot Battery Metals and American West Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American West Metals and Patriot 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 Patriot Battery Metals are associated (or correlated) with American West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American West Metals has no effect on the direction of Patriot Battery i.e., Patriot Battery and American West go up and down completely randomly.
Pair Corralation between Patriot Battery and American West
Assuming the 90 days trading horizon Patriot Battery Metals is expected to under-perform the American West. In addition to that, Patriot Battery is 1.51 times more volatile than American West Metals. It trades about -0.43 of its total potential returns per unit of risk. American West Metals is currently generating about -0.35 per unit of volatility. If you would invest 7.90 in American West Metals on August 30, 2024 and sell it today you would lose (1.70) from holding American West Metals or give up 21.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Patriot Battery Metals vs. American West Metals
Performance |
| Timeline |
| Patriot Battery Metals |
| American West Metals |
Patriot Battery and American West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Patriot Battery and American West
The main advantage of trading using opposite Patriot Battery and American West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patriot Battery position performs unexpectedly, American West 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 American West will offset losses from the drop in American West's long position.| Patriot Battery vs. Queste Communications | Patriot Battery vs. Regis Healthcare | Patriot Battery vs. Austco Healthcare | Patriot Battery vs. Apiam Animal Health |
| American West vs. Northern Star Resources | American West vs. Evolution Mining | American West vs. Bluescope Steel | American West vs. Sandfire Resources NL |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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