Correlation Between American Rare and Québec Nickel

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

By analyzing existing cross correlation between American Rare Earths and Qubec Nickel Corp, you can compare the effects of market volatilities on American Rare and Québec Nickel 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 American Rare with a short position of Québec Nickel. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Rare and Québec Nickel.

Diversification Opportunities for American Rare and Québec Nickel

-0.14

Correlation Coefficient

American Rare  Québec Nickel

Good diversification

The 3 months correlation between American and Québec is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding American Rare Earths and Qubec Nickel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qubec Nickel Corp and American Rare 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 American Rare Earths are associated (or correlated) with Québec Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qubec Nickel Corp has no effect on the direction of American Rare i.e., American Rare and Québec Nickel go up and down completely randomly.

Pair Corralation between American Rare and Québec Nickel

Assuming the 90 days horizon American Rare Earths is expected to generate 0.29 times more return on investment than Québec Nickel. However, American Rare Earths is 3.49 times less risky than Québec Nickel. It trades about 0.02 of its potential returns per unit of risk. Qubec Nickel Corp is currently generating about -0.01 per unit of risk. If you would invest  19.00  in American Rare Earths on September 4, 2024 and sell it today you would earn a total of  0.00  from holding American Rare Earths or generate 0.0% return on investment over 90 days.

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

American Rare Earths  vs.  Qubec Nickel Corp

American Rare Earths

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Rare Earths are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, American Rare is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Qubec Nickel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qubec Nickel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with American Rare and Québec Nickel

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

The idea behind American Rare Earths and Qubec Nickel Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.