Correlation Between Nickel Mines and Commerce Resources

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

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

Diversification Opportunities for Nickel Mines and Commerce Resources

0.65

Correlation Coefficient

Nickel Mines  Commerce Resources

Poor diversification

The 3 months correlation between Nickel and Commerce is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Nickel Mines Limited and Commerce Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerce Resources Corp and Nickel Mines 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 Nickel Mines Limited are associated (or correlated) with Commerce Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerce Resources Corp has no effect on the direction of Nickel Mines i.e., Nickel Mines and Commerce Resources go up and down completely randomly.

Pair Corralation between Nickel Mines and Commerce Resources

Assuming the 90 days horizon Nickel Mines is expected to generate 1.05 times less return on investment than Commerce Resources. But when comparing it to its historical volatility, Nickel Mines Limited is 1.62 times less risky than Commerce Resources. It trades about 0.02 of its potential returns per unit of risk. Commerce Resources Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Commerce Resources Corp on September 12, 2024 and sell it today you would lose (6.48) from holding Commerce Resources Corp or give up 54.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Nickel Mines Limited  vs.  Commerce Resources Corp

Nickel Mines Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nickel Mines Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Nickel Mines is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Commerce Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commerce Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Commerce Resources is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nickel Mines and Commerce Resources

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

The idea behind Nickel Mines Limited and Commerce Resources 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.