Correlation Between Magna Mining and FPX Nickel

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

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

Diversification Opportunities for Magna Mining and FPX Nickel

-0.7

Correlation Coefficient

Magna Mining  FPX Nickel

Excellent diversification

The 3 months correlation between Magna and FPX is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Magna Mining and FPX Nickel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FPX Nickel Corp and Magna Mining 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 Magna Mining are associated (or correlated) with FPX Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FPX Nickel Corp has no effect on the direction of Magna Mining i.e., Magna Mining and FPX Nickel go up and down completely randomly.

Pair Corralation between Magna Mining and FPX Nickel

Assuming the 90 days trading horizon Magna Mining is expected to generate 2.04 times more return on investment than FPX Nickel. However, Magna Mining is 2.04 times more volatile than FPX Nickel Corp. It trades about 0.24 of its potential returns per unit of risk. FPX Nickel Corp is currently generating about -0.12 per unit of risk. If you would invest  146.00  in Magna Mining on October 12, 2024 and sell it today you would earn a total of  22.00  from holding Magna Mining or generate 15.07% return on investment over 90 days.

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

Magna Mining  vs.  FPX Nickel Corp

Magna Mining

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magna Mining are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Magna Mining showed solid returns over the last few months and may actually be approaching a breakup point.

FPX Nickel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FPX Nickel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Magna Mining and FPX Nickel

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

The idea behind Magna Mining and FPX Nickel 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.