Correlation Between Québec Nickel and American Lithium

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

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

Diversification Opportunities for Québec Nickel and American Lithium

0.29

Correlation Coefficient

Québec Nickel  American Lithium

Modest diversification

The 3 months correlation between Québec and American is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Qubec Nickel Corp and American Lithium Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Lithium Minerals and Québec Nickel 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 Qubec Nickel Corp are associated (or correlated) with American Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Lithium Minerals has no effect on the direction of Québec Nickel i.e., Québec Nickel and American Lithium go up and down completely randomly.

Pair Corralation between Québec Nickel and American Lithium

Assuming the 90 days horizon Qubec Nickel Corp is expected to under-perform the American Lithium. But the otc stock apears to be less risky and, when comparing its historical volatility, Qubec Nickel Corp is 1.04 times less risky than American Lithium. The otc stock trades about -0.01 of its potential returns per unit of risk. The American Lithium Minerals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2.04  in American Lithium Minerals on September 2, 2024 and sell it today you would earn a total of  0.89  from holding American Lithium Minerals or generate 43.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Qubec Nickel Corp  vs.  American Lithium Minerals

Qubec Nickel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qubec Nickel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

American Lithium Minerals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Lithium Minerals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile essential indicators, American Lithium displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Québec Nickel and American Lithium

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

The idea behind Qubec Nickel Corp and American Lithium Minerals 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.