Correlation Between Nicola Mining and Diamond Estates

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

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

Diversification Opportunities for Nicola Mining and Diamond Estates

-0.55

Correlation Coefficient

Nicola Mining  Diamond Estates

Excellent diversification

The 3 months correlation between Nicola and Diamond is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Nicola Mining and Diamond Estates Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Estates Wines and Nicola 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 Nicola Mining are associated (or correlated) with Diamond Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Estates Wines has no effect on the direction of Nicola Mining i.e., Nicola Mining and Diamond Estates go up and down completely randomly.

Pair Corralation between Nicola Mining and Diamond Estates

Assuming the 90 days horizon Nicola Mining is expected to generate 1.25 times more return on investment than Diamond Estates. However, Nicola Mining is 1.25 times more volatile than Diamond Estates Wines. It trades about 0.14 of its potential returns per unit of risk. Diamond Estates Wines is currently generating about -0.03 per unit of risk. If you would invest  29.00  in Nicola Mining on December 29, 2024 and sell it today you would earn a total of  11.00  from holding Nicola Mining or generate 37.93% return on investment over 90 days.

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

Nicola Mining  vs.  Diamond Estates Wines

Nicola Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nicola Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nicola Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Diamond Estates Wines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diamond Estates Wines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Diamond Estates is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Nicola Mining and Diamond Estates

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

The idea behind Nicola Mining and Diamond Estates Wines 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 Transaction History module to view history of all your transactions and understand their impact on performance.