Correlation Between Canada Nickel and Lotus Resources

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

By analyzing existing cross correlation between Canada Nickel and Lotus Resources Limited, you can compare the effects of market volatilities on Canada Nickel and Lotus Resources 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 Lotus Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canada Nickel and Lotus Resources.

Diversification Opportunities for Canada Nickel and Lotus Resources

-0.46

Correlation Coefficient

Canada Nickel  Lotus Resources

Very good diversification

The 3 months correlation between Canada and Lotus is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Canada Nickel and Lotus Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Resources 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 Lotus Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Resources has no effect on the direction of Canada Nickel i.e., Canada Nickel and Lotus Resources go up and down completely randomly.

Pair Corralation between Canada Nickel and Lotus Resources

Assuming the 90 days horizon Canada Nickel is expected to generate 0.74 times more return on investment than Lotus Resources. However, Canada Nickel is 1.35 times less risky than Lotus Resources. It trades about 0.06 of its potential returns per unit of risk. Lotus Resources Limited is currently generating about 0.0 per unit of risk. If you would invest  63.00  in Canada Nickel on December 29, 2024 and sell it today you would earn a total of  7.00  from holding Canada Nickel or generate 11.11% 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.  Lotus Resources Limited

Canada Nickel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canada Nickel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Canada Nickel reported solid returns over the last few months and may actually be approaching a breakup point.

Lotus Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lotus Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lotus Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Canada Nickel and Lotus Resources

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

The idea behind Canada Nickel and Lotus Resources Limited 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.