Correlation Between Enovix Corp and Electra Battery

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

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

Diversification Opportunities for Enovix Corp and Electra Battery

0.63

Correlation Coefficient

Enovix Corp  Electra Battery

Poor diversification

The 3 months correlation between Enovix and Electra is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Enovix 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 Enovix Corp 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 Enovix 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 Enovix Corp i.e., Enovix Corp and Electra Battery go up and down completely randomly.

Pair Corralation between Enovix Corp and Electra Battery

Given the investment horizon of 90 days Enovix Corp is expected to under-perform the Electra Battery. In addition to that, Enovix Corp is 1.11 times more volatile than Electra Battery Materials. It trades about -0.37 of its total potential returns per unit of risk. Electra Battery Materials is currently generating about -0.11 per unit of volatility. If you would invest  45.00  in Electra Battery Materials on January 27, 2024 and sell it today you would lose (4.00) from holding Electra Battery Materials or give up 8.89% of portfolio value over 90 days.

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

Enovix Corp  vs.  Electra Battery Materials

Enovix Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enovix Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Electra Battery Materials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Electra Battery Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental drivers, Electra Battery displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enovix Corp and Electra Battery

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

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.