Correlation Between Canada Nickel and Nobel Resources

Can any of the company-specific risk be diversified away by investing in both Canada Nickel and Nobel 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 Nobel 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 Nobel Resources Corp, you can compare the effects of market volatilities on Canada Nickel and Nobel 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 Nobel Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canada Nickel and Nobel Resources.

Diversification Opportunities for Canada Nickel and Nobel Resources

0.8

Correlation Coefficient

Canada Nickel  Nobel Resources

Very poor diversification

The 3 months correlation between Canada and Nobel is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Canada Nickel and Nobel Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nobel Resources Corp 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 Nobel Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nobel Resources Corp has no effect on the direction of Canada Nickel i.e., Canada Nickel and Nobel Resources go up and down completely randomly.

Pair Corralation between Canada Nickel and Nobel Resources

Assuming the 90 days horizon Canada Nickel is expected to generate 2.4 times more return on investment than Nobel Resources. However, Canada Nickel is 2.4 times more volatile than Nobel Resources Corp. It trades about 0.06 of its potential returns per unit of risk. Nobel Resources Corp is currently generating about 0.13 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 Together
Strength	Strong
Accuracy	95.31%
Values	Daily Returns

Canada Nickel  vs.  Nobel Resources Corp

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.

Nobel Resources Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nobel Resources Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nobel Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Canada Nickel and Nobel Resources

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

The idea behind Canada Nickel and Nobel Resources 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.