Correlation Between SPTSX Dividend and Power Nickel

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

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

Diversification Opportunities for SPTSX Dividend and Power Nickel

-0.72

Correlation Coefficient

SPTSX Dividend  Power Nickel

Pay attention - limited upside

The 3 months correlation between SPTSX and Power is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding SPTSX Dividend Aristocrats and Power Nickel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Nickel and SPTSX Dividend 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 SPTSX Dividend Aristocrats are associated (or correlated) with Power Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Nickel has no effect on the direction of SPTSX Dividend i.e., SPTSX Dividend and Power Nickel go up and down completely randomly.

Pair Corralation between SPTSX Dividend and Power Nickel

Assuming the 90 days trading horizon SPTSX Dividend is expected to generate 27.46 times less return on investment than Power Nickel. But when comparing it to its historical volatility, SPTSX Dividend Aristocrats is 9.67 times less risky than Power Nickel. It trades about 0.08 of its potential returns per unit of risk. Power Nickel is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  91.00  in Power Nickel on October 27, 2024 and sell it today you would earn a total of  20.00  from holding Power Nickel or generate 21.98% return on investment over 90 days.

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

SPTSX Dividend Aristocrats  vs.  Power Nickel

Pair Trading with SPTSX Dividend and Power Nickel

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

The idea behind SPTSX Dividend Aristocrats and Power Nickel 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 Valuation module to check real value of public entities based on technical and fundamental data.