Correlation Between Tree Island and Patriot Battery

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

By analyzing existing cross correlation between Tree Island Steel and Patriot Battery Metals, you can compare the effects of market volatilities on Tree Island and Patriot 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 Tree Island with a short position of Patriot Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tree Island and Patriot Battery.

Diversification Opportunities for Tree Island and Patriot Battery

0.04

Correlation Coefficient

Tree Island  Patriot Battery

Significant diversification

The 3 months correlation between Tree and Patriot is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Tree Island Steel and Patriot Battery Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patriot Battery Metals and Tree Island 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 Tree Island Steel are associated (or correlated) with Patriot Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patriot Battery Metals has no effect on the direction of Tree Island i.e., Tree Island and Patriot Battery go up and down completely randomly.

Pair Corralation between Tree Island and Patriot Battery

Assuming the 90 days trading horizon Tree Island is expected to generate 58.85 times less return on investment than Patriot Battery. But when comparing it to its historical volatility, Tree Island Steel is 3.42 times less risky than Patriot Battery. It trades about 0.01 of its potential returns per unit of risk. Patriot Battery Metals is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  247.00  in Patriot Battery Metals on April 24, 2025 and sell it today you would earn a total of  210.00  from holding Patriot Battery Metals or generate 85.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Tree Island Steel  vs.  Patriot Battery Metals

Tree Island Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tree Island Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Tree Island is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Patriot Battery Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Patriot Battery Metals are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Patriot Battery displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tree Island and Patriot Battery

The main advantage of trading using opposite Tree Island and Patriot Battery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tree Island position performs unexpectedly, Patriot 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 Patriot Battery will offset losses from the drop in Patriot Battery's long position.

The idea behind Tree Island Steel and Patriot Battery Metals 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.