Correlation Between Eskay Mining and Nickel Mines

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

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

Diversification Opportunities for Eskay Mining and Nickel Mines

-0.55

Correlation Coefficient

Eskay Mining  Nickel Mines

Excellent diversification

The 3 months correlation between Eskay and Nickel is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Eskay Mining Corp and Nickel Mines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nickel Mines Limited and Eskay Mining 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 Eskay Mining Corp are associated (or correlated) with Nickel Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nickel Mines Limited has no effect on the direction of Eskay Mining i.e., Eskay Mining and Nickel Mines go up and down completely randomly.

Pair Corralation between Eskay Mining and Nickel Mines

Assuming the 90 days horizon Eskay Mining Corp is expected to generate 1.42 times more return on investment than Nickel Mines. However, Eskay Mining is 1.42 times more volatile than Nickel Mines Limited. It trades about 0.14 of its potential returns per unit of risk. Nickel Mines Limited is currently generating about -0.03 per unit of risk. If you would invest  12.00  in Eskay Mining Corp on December 26, 2024 and sell it today you would earn a total of  7.00  from holding Eskay Mining Corp or generate 58.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Eskay Mining Corp  vs.  Nickel Mines Limited

Eskay Mining Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eskay Mining Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Eskay Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Nickel Mines Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nickel Mines Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary 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 Eskay Mining and Nickel Mines

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

The idea behind Eskay Mining Corp and Nickel Mines 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.