Correlation Between Ioneer and Electra Battery

Can any of the company-specific risk be diversified away by investing in both Ioneer 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 Ioneer and Electra Battery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ioneer and Electra Battery Materials, you can compare the effects of market volatilities on Ioneer 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 Ioneer with a short position of Electra Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ioneer and Electra Battery.

Diversification Opportunities for Ioneer and Electra Battery

-0.37

Correlation Coefficient

Ioneer  Electra Battery

Very good diversification

The 3 months correlation between Ioneer and Electra is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding ioneer 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 Ioneer 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 ioneer 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 Ioneer i.e., Ioneer and Electra Battery go up and down completely randomly.

Pair Corralation between Ioneer and Electra Battery

Assuming the 90 days horizon ioneer is expected to generate 2.68 times more return on investment than Electra Battery. However, Ioneer is 2.68 times more volatile than Electra Battery Materials. It trades about 0.08 of its potential returns per unit of risk. Electra Battery Materials is currently generating about -0.05 per unit of risk. If you would invest  13.00  in ioneer on March 7, 2024 and sell it today you would earn a total of  1.00  from holding ioneer or generate 7.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ioneer  vs.  Electra Battery Materials

ioneer

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ioneer are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Ioneer reported solid returns over the last few months and may actually be approaching a breakup point.

Electra Battery Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electra Battery Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Ioneer and Electra Battery

The main advantage of trading using opposite Ioneer and Electra Battery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ioneer 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.

The idea behind ioneer and Electra Battery Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.