Correlation Between FPX Nickel and Ultra Resources

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

Diversification Opportunities for FPX Nickel and Ultra Resources

0.4

Correlation Coefficient

FPX Nickel  Ultra Resources

Very weak diversification

The 3 months correlation between FPX and Ultra is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding FPX Nickel Corp and Ultra Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Resources 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 Ultra Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Resources has no effect on the direction of FPX Nickel i.e., FPX Nickel and Ultra Resources go up and down completely randomly.

Pair Corralation between FPX Nickel and Ultra Resources

Assuming the 90 days horizon FPX Nickel Corp is expected to under-perform the Ultra Resources. But the otc stock apears to be less risky and, when comparing its historical volatility, FPX Nickel Corp is 5.13 times less risky than Ultra Resources. The otc stock trades about -0.07 of its potential returns per unit of risk. The Ultra Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Ultra Resources on October 11, 2024 and sell it today you would earn a total of  0.00  from holding Ultra Resources or generate 0.0% return on investment over 90 days.

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

FPX Nickel Corp  vs.  Ultra Resources

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 fragile 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.

Ultra Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ultra Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FPX Nickel and Ultra Resources

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

The idea behind FPX Nickel Corp and Ultra Resources 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.