Correlation Between Nickel Mines and StrikePoint Gold

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

Diversification Opportunities for Nickel Mines and StrikePoint Gold

0.05

Correlation Coefficient

Nickel Mines  StrikePoint Gold

Significant diversification

The 3 months correlation between Nickel and StrikePoint is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Nickel Mines Limited and StrikePoint Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StrikePoint Gold 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 StrikePoint Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StrikePoint Gold has no effect on the direction of Nickel Mines i.e., Nickel Mines and StrikePoint Gold go up and down completely randomly.

Pair Corralation between Nickel Mines and StrikePoint Gold

Assuming the 90 days horizon Nickel Mines Limited is expected to under-perform the StrikePoint Gold. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nickel Mines Limited is 2.66 times less risky than StrikePoint Gold. The pink sheet trades about -0.03 of its potential returns per unit of risk. The StrikePoint Gold is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  15.00  in StrikePoint Gold on December 30, 2024 and sell it today you would lose (3.00) from holding StrikePoint Gold or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

Nickel Mines Limited  vs.  StrikePoint Gold

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.

StrikePoint Gold

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Nickel Mines and StrikePoint Gold

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

The idea behind Nickel Mines Limited and StrikePoint Gold 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.