Correlation Between Nickel Mines and Grid Metals

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

Diversification Opportunities for Nickel Mines and Grid Metals

-0.02

Correlation Coefficient

Nickel Mines  Grid Metals

Good diversification

The 3 months correlation between Nickel and Grid is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Nickel Mines Limited and Grid Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grid Metals 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 Grid Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grid Metals Corp has no effect on the direction of Nickel Mines i.e., Nickel Mines and Grid Metals go up and down completely randomly.

Pair Corralation between Nickel Mines and Grid Metals

Assuming the 90 days horizon Nickel Mines Limited is expected to under-perform the Grid Metals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nickel Mines Limited is 1.3 times less risky than Grid Metals. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Grid Metals Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2.55  in Grid Metals Corp on December 28, 2024 and sell it today you would earn a total of  0.13  from holding Grid Metals Corp or generate 5.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Nickel Mines Limited  vs.  Grid Metals Corp

Nickel Mines Limited

Risk-Adjusted Performance

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 latest weak performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Grid Metals Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grid Metals Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Grid Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nickel Mines and Grid Metals

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

The idea behind Nickel Mines Limited and Grid 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.