Correlation Between FPX Nickel and HPQ Silicon

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

Diversification Opportunities for FPX Nickel and HPQ Silicon

0.79

Correlation Coefficient

FPX Nickel  HPQ Silicon

Poor diversification

The 3 months correlation between FPX and HPQ is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding FPX Nickel Corp and HPQ Silicon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HPQ Silicon 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 HPQ Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HPQ Silicon Resources has no effect on the direction of FPX Nickel i.e., FPX Nickel and HPQ Silicon go up and down completely randomly.

Pair Corralation between FPX Nickel and HPQ Silicon

Assuming the 90 days horizon FPX Nickel Corp is expected to under-perform the HPQ Silicon. But the stock apears to be less risky and, when comparing its historical volatility, FPX Nickel Corp is 2.57 times less risky than HPQ Silicon. The stock trades about -0.09 of its potential returns per unit of risk. The HPQ Silicon Resources is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  26.00  in HPQ Silicon Resources on October 9, 2024 and sell it today you would lose (1.00) from holding HPQ Silicon Resources or give up 3.85% of portfolio value over 90 days.

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

FPX Nickel Corp  vs.  HPQ Silicon 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. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

HPQ Silicon Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HPQ Silicon Resources 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with FPX Nickel and HPQ Silicon

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

The idea behind FPX Nickel Corp and HPQ Silicon 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.