Correlation Between Nickel Mines and Eskay Mining

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

Diversification Opportunities for Nickel Mines and Eskay Mining

0.4

Correlation Coefficient

Nickel Mines  Eskay Mining

Very weak diversification

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

Pair Corralation between Nickel Mines and Eskay Mining

Assuming the 90 days horizon Nickel Mines Limited is expected to generate 0.52 times more return on investment than Eskay Mining. However, Nickel Mines Limited is 1.94 times less risky than Eskay Mining. It trades about 0.0 of its potential returns per unit of risk. Eskay Mining Corp is currently generating about -0.06 per unit of risk. If you would invest  60.00  in Nickel Mines Limited on September 13, 2024 and sell it today you would lose (2.00) from holding Nickel Mines Limited or give up 3.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Nickel Mines Limited  vs.  Eskay Mining 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.

Eskay Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eskay Mining 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 basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Nickel Mines and Eskay Mining

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

The idea behind Nickel Mines Limited and Eskay Mining 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.