Correlation Between Québec Nickel and Canstar Resources

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

Diversification Opportunities for Québec Nickel and Canstar Resources

0.01

Correlation Coefficient

Québec Nickel  Canstar Resources

Significant diversification

The 3 months correlation between Québec and Canstar is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Qubec Nickel Corp and Canstar Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canstar Resources 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 Canstar Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canstar Resources has no effect on the direction of Québec Nickel i.e., Québec Nickel and Canstar Resources go up and down completely randomly.

Pair Corralation between Québec Nickel and Canstar Resources

Assuming the 90 days horizon Qubec Nickel Corp is expected to generate 1.41 times more return on investment than Canstar Resources. However, Québec Nickel is 1.41 times more volatile than Canstar Resources. It trades about -0.01 of its potential returns per unit of risk. Canstar Resources is currently generating about -0.06 per unit of risk. If you would invest  8.00  in Qubec Nickel Corp on September 4, 2024 and sell it today you would lose (6.25) from holding Qubec Nickel Corp or give up 78.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Qubec Nickel Corp  vs.  Canstar Resources

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 weak 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.

Canstar Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canstar Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Québec Nickel and Canstar Resources

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

The idea behind Qubec Nickel Corp and Canstar 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..