Correlation Between Canada Nickel and E3 Lithium

Can any of the company-specific risk be diversified away by investing in both Canada Nickel and E3 Lithium 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 Canada Nickel and E3 Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canada Nickel and E3 Lithium, you can compare the effects of market volatilities on Canada Nickel and E3 Lithium 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 Canada Nickel with a short position of E3 Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canada Nickel and E3 Lithium.

Diversification Opportunities for Canada Nickel and E3 Lithium

-0.47

Correlation Coefficient

Canada Nickel  E3 Lithium

Very good diversification

The 3 months correlation between Canada and ETL is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Canada Nickel and E3 Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E3 Lithium and Canada Nickel 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 Canada Nickel are associated (or correlated) with E3 Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E3 Lithium has no effect on the direction of Canada Nickel i.e., Canada Nickel and E3 Lithium go up and down completely randomly.

Pair Corralation between Canada Nickel and E3 Lithium

Assuming the 90 days horizon Canada Nickel is expected to generate 1.21 times more return on investment than E3 Lithium. However, Canada Nickel is 1.21 times more volatile than E3 Lithium. It trades about 0.06 of its potential returns per unit of risk. E3 Lithium is currently generating about -0.06 per unit of risk. If you would invest  92.00  in Canada Nickel on December 28, 2024 and sell it today you would earn a total of  9.00  from holding Canada Nickel or generate 9.78% return on investment over 90 days.

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

Canada Nickel  vs.  E3 Lithium

Canada Nickel

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canada Nickel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Canada Nickel showed solid returns over the last few months and may actually be approaching a breakup point.

E3 Lithium

Risk-Adjusted Performance

Very Weak

Over the last 90 days E3 Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Canada Nickel and E3 Lithium

The main advantage of trading using opposite Canada Nickel and E3 Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canada Nickel position performs unexpectedly, E3 Lithium 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 E3 Lithium will offset losses from the drop in E3 Lithium's long position.

The idea behind Canada Nickel and E3 Lithium 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.