Correlation Between Flying Nickel and Power Nickel

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

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

Diversification Opportunities for Flying Nickel and Power Nickel

-0.56

Correlation Coefficient

Flying Nickel  Power Nickel

Excellent diversification

The 3 months correlation between Flying and Power is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Flying Nickel Mining and Power Nickel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Nickel and Flying 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 Flying Nickel Mining are associated (or correlated) with Power Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Nickel has no effect on the direction of Flying Nickel i.e., Flying Nickel and Power Nickel go up and down completely randomly.

Pair Corralation between Flying Nickel and Power Nickel

Assuming the 90 days trading horizon Flying Nickel Mining is expected to under-perform the Power Nickel. In addition to that, Flying Nickel is 1.03 times more volatile than Power Nickel. It trades about -0.13 of its total potential returns per unit of risk. Power Nickel is currently generating about 0.23 per unit of volatility. If you would invest  74.00  in Power Nickel on October 26, 2024 and sell it today you would earn a total of  38.00  from holding Power Nickel or generate 51.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	68.29%
Values	Daily Returns

Flying Nickel Mining  vs.  Power Nickel

Flying Nickel Mining

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Flying Nickel Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unfluctuating basic indicators, Flying Nickel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Power Nickel

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Power Nickel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Power Nickel showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Flying Nickel and Power Nickel

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

The idea behind Flying Nickel Mining and Power 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.