Correlation Between Flying Nickel and Québec Nickel

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

Diversification Opportunities for Flying Nickel and Québec Nickel

0.35

Correlation Coefficient

Flying Nickel  Québec Nickel

Weak diversification

The 3 months correlation between Flying and Québec is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Flying Nickel Mining and Qubec Nickel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qubec Nickel Corp 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 Québec Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qubec Nickel Corp has no effect on the direction of Flying Nickel i.e., Flying Nickel and Québec Nickel go up and down completely randomly.

Pair Corralation between Flying Nickel and Québec Nickel

Assuming the 90 days horizon Flying Nickel Mining is expected to generate 0.89 times more return on investment than Québec Nickel. However, Flying Nickel Mining is 1.12 times less risky than Québec Nickel. It trades about 0.22 of its potential returns per unit of risk. Qubec Nickel Corp is currently generating about -0.03 per unit of risk. If you would invest  1.60  in Flying Nickel Mining on December 26, 2024 and sell it today you would earn a total of  1.06  from holding Flying Nickel Mining or generate 66.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	31.75%
Values	Daily Returns

Flying Nickel Mining  vs.  Qubec Nickel Corp

Flying Nickel Mining

Risk-Adjusted Performance

Solid

Over the last 90 days Flying Nickel Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Flying Nickel reported solid returns over the last few months and may actually be approaching a breakup point.

Qubec Nickel Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Qubec Nickel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Flying Nickel and Québec Nickel

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

The idea behind Flying Nickel Mining and Qubec Nickel 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.