Correlation Between Frontier Lithium and Canada Nickel

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

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

Diversification Opportunities for Frontier Lithium and Canada Nickel

0.58

Correlation Coefficient

Frontier Lithium  Canada Nickel

Very weak diversification

The 3 months correlation between Frontier and Canada is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Lithium and Canada Nickel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canada Nickel and Frontier Lithium 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 Frontier Lithium are associated (or correlated) with Canada Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canada Nickel has no effect on the direction of Frontier Lithium i.e., Frontier Lithium and Canada Nickel go up and down completely randomly.

Pair Corralation between Frontier Lithium and Canada Nickel

Given the investment horizon of 90 days Frontier Lithium is expected to under-perform the Canada Nickel. In addition to that, Frontier Lithium is 1.21 times more volatile than Canada Nickel. It trades about -0.04 of its total potential returns per unit of risk. Canada Nickel is currently generating about -0.01 per unit of volatility. If you would invest  164.00  in Canada Nickel on September 4, 2024 and sell it today you would lose (68.00) from holding Canada Nickel or give up 41.46% of portfolio value over 90 days.

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

Frontier Lithium  vs.  Canada Nickel

Frontier Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontier Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Canada Nickel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canada Nickel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Canada Nickel is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Frontier Lithium and Canada Nickel

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

The idea behind Frontier Lithium and Canada 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.