Correlation Between Nicola Mining and Signature Resources

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

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

Diversification Opportunities for Nicola Mining and Signature Resources

0.5

Correlation Coefficient

Nicola Mining  Signature Resources

Very weak diversification

The 3 months correlation between Nicola and Signature is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Nicola Mining and Signature Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signature Resources 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 Signature Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signature Resources has no effect on the direction of Nicola Mining i.e., Nicola Mining and Signature Resources go up and down completely randomly.

Pair Corralation between Nicola Mining and Signature Resources

Assuming the 90 days horizon Nicola Mining is expected to generate 2.56 times less return on investment than Signature Resources. But when comparing it to its historical volatility, Nicola Mining is 3.1 times less risky than Signature Resources. It trades about 0.08 of its potential returns per unit of risk. Signature Resources is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Signature Resources on December 4, 2024 and sell it today you would earn a total of  0.50  from holding Signature Resources or generate 14.29% return on investment over 90 days.

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

Nicola Mining  vs.  Signature Resources

Nicola Mining

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nicola Mining are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Nicola Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Signature Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Signature Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Signature Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nicola Mining and Signature Resources

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

The idea behind Nicola Mining and Signature Resources 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.