Correlation Between Québec Nickel and American Rare

Can any of the company-specific risk be diversified away by investing in both Québec Nickel and American Rare 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 Rare 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 Rare Earths, you can compare the effects of market volatilities on Québec Nickel and American Rare 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 Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Québec Nickel and American Rare.

Diversification Opportunities for Québec Nickel and American Rare

-0.09

Correlation Coefficient

Québec Nickel  American Rare

Good diversification

The 3 months correlation between Québec and American is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Qubec Nickel Corp and American Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Rare Earths 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 Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Rare Earths has no effect on the direction of Québec Nickel i.e., Québec Nickel and American Rare go up and down completely randomly.

Pair Corralation between Québec Nickel and American Rare

Assuming the 90 days horizon Qubec Nickel Corp is expected to under-perform the American Rare. In addition to that, Québec Nickel is 5.87 times more volatile than American Rare Earths. It trades about -0.02 of its total potential returns per unit of risk. American Rare Earths is currently generating about 0.07 per unit of volatility. If you would invest  17.00  in American Rare Earths on December 30, 2024 and sell it today you would earn a total of  2.00  from holding American Rare Earths or generate 11.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Qubec Nickel Corp  vs.  American Rare Earths

Qubec Nickel Corp

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

American Rare Earths

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Rare Earths are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Rare reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Québec Nickel and American Rare

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

The idea behind Qubec Nickel Corp and American Rare Earths 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.