Correlation Between Nicola Mining and Sun Peak

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

By analyzing existing cross correlation between Nicola Mining and Sun Peak Metals, you can compare the effects of market volatilities on Nicola Mining and Sun Peak 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 Sun Peak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nicola Mining and Sun Peak.

Diversification Opportunities for Nicola Mining and Sun Peak

0.2

Correlation Coefficient

Nicola Mining  Sun Peak

Modest diversification

The 3 months correlation between Nicola and Sun is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Nicola Mining and Sun Peak Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Peak Metals 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 Sun Peak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Peak Metals has no effect on the direction of Nicola Mining i.e., Nicola Mining and Sun Peak go up and down completely randomly.

Pair Corralation between Nicola Mining and Sun Peak

Assuming the 90 days horizon Nicola Mining is expected to generate 0.78 times more return on investment than Sun Peak. However, Nicola Mining is 1.28 times less risky than Sun Peak. It trades about 0.13 of its potential returns per unit of risk. Sun Peak Metals is currently generating about -0.01 per unit of risk. If you would invest  28.00  in Nicola Mining on December 20, 2024 and sell it today you would earn a total of  9.00  from holding Nicola Mining or generate 32.14% return on investment over 90 days.

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

Nicola Mining  vs.  Sun Peak Metals

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.

Sun Peak Metals

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Nicola Mining and Sun Peak

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

The idea behind Nicola Mining and Sun Peak Metals 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.