Correlation Between FPX Nickel and Lithium Chile

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

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

Diversification Opportunities for FPX Nickel and Lithium Chile

-0.18

Correlation Coefficient

FPX Nickel  Lithium Chile

Good diversification

The 3 months correlation between FPX and Lithium is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding FPX Nickel Corp and Lithium Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Chile and FPX 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 FPX Nickel Corp are associated (or correlated) with Lithium Chile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Chile has no effect on the direction of FPX Nickel i.e., FPX Nickel and Lithium Chile go up and down completely randomly.

Pair Corralation between FPX Nickel and Lithium Chile

Assuming the 90 days horizon FPX Nickel Corp is expected to under-perform the Lithium Chile. In addition to that, FPX Nickel is 1.08 times more volatile than Lithium Chile. It trades about -0.01 of its total potential returns per unit of risk. Lithium Chile is currently generating about 0.02 per unit of volatility. If you would invest  50.00  in Lithium Chile on October 12, 2024 and sell it today you would earn a total of  0.00  from holding Lithium Chile or generate 0.0% return on investment over 90 days.

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

FPX Nickel Corp  vs.  Lithium Chile

FPX Nickel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FPX 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Lithium Chile

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Chile are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Lithium Chile is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with FPX Nickel and Lithium Chile

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

The idea behind FPX Nickel Corp and Lithium Chile 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.