Correlation Between FPX Nickel and Transition Metals

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

Diversification Opportunities for FPX Nickel and Transition Metals

0.68

Correlation Coefficient

FPX Nickel  Transition Metals

Poor diversification

The 3 months correlation between FPX and Transition is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding FPX Nickel Corp and Transition Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transition Metals Corp 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 Transition Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transition Metals Corp has no effect on the direction of FPX Nickel i.e., FPX Nickel and Transition Metals go up and down completely randomly.

Pair Corralation between FPX Nickel and Transition Metals

Assuming the 90 days horizon FPX Nickel Corp is expected to generate 0.35 times more return on investment than Transition Metals. However, FPX Nickel Corp is 2.88 times less risky than Transition Metals. It trades about -0.05 of its potential returns per unit of risk. Transition Metals Corp is currently generating about -0.05 per unit of risk. If you would invest  28.00  in FPX Nickel Corp on October 27, 2024 and sell it today you would lose (3.00) from holding FPX Nickel Corp or give up 10.71% 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.  Transition Metals Corp

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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Transition Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transition Metals 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.

Pair Trading with FPX Nickel and Transition Metals

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

The idea behind FPX Nickel Corp and Transition Metals 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.