Correlation Between BCM Resources and Fathom Nickel

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

By analyzing existing cross correlation between BCM Resources and Fathom Nickel, you can compare the effects of market volatilities on BCM Resources and Fathom 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 BCM Resources with a short position of Fathom Nickel. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCM Resources and Fathom Nickel.

Diversification Opportunities for BCM Resources and Fathom Nickel

0.43

Correlation Coefficient

BCM Resources  Fathom Nickel

Very weak diversification

The 3 months correlation between BCM and Fathom is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding BCM Resources and Fathom Nickel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fathom Nickel and BCM Resources 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 BCM Resources are associated (or correlated) with Fathom Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fathom Nickel has no effect on the direction of BCM Resources i.e., BCM Resources and Fathom Nickel go up and down completely randomly.

Pair Corralation between BCM Resources and Fathom Nickel

Assuming the 90 days horizon BCM Resources is expected to generate 1.79 times more return on investment than Fathom Nickel. However, BCM Resources is 1.79 times more volatile than Fathom Nickel. It trades about 0.04 of its potential returns per unit of risk. Fathom Nickel is currently generating about -0.05 per unit of risk. If you would invest  4.00  in BCM Resources on September 3, 2024 and sell it today you would lose (0.47) from holding BCM Resources or give up 11.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

BCM Resources  vs.  Fathom Nickel

BCM Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BCM Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BCM Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Fathom Nickel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fathom Nickel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BCM Resources and Fathom Nickel

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

The idea behind BCM Resources and Fathom Nickel 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.