Correlation Between Québec Nickel and Ceylon Graphite

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

Diversification Opportunities for Québec Nickel and Ceylon Graphite

0.04

Correlation Coefficient

Québec Nickel  Ceylon Graphite

Significant diversification

The 3 months correlation between Québec and Ceylon is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Qubec Nickel Corp and Ceylon Graphite Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceylon Graphite Corp 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 Ceylon Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceylon Graphite Corp has no effect on the direction of Québec Nickel i.e., Québec Nickel and Ceylon Graphite go up and down completely randomly.

Pair Corralation between Québec Nickel and Ceylon Graphite

Assuming the 90 days horizon Qubec Nickel Corp is expected to under-perform the Ceylon Graphite. In addition to that, Québec Nickel is 1.52 times more volatile than Ceylon Graphite Corp. It trades about -0.01 of its total potential returns per unit of risk. Ceylon Graphite Corp is currently generating about -0.01 per unit of volatility. If you would invest  1.72  in Ceylon Graphite Corp on September 3, 2024 and sell it today you would lose (0.43) from holding Ceylon Graphite Corp or give up 25.0% of portfolio value over 90 days.

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

Qubec Nickel Corp  vs.  Ceylon Graphite Corp

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.

Ceylon Graphite Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ceylon Graphite Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ceylon Graphite is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Québec Nickel and Ceylon Graphite

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

The idea behind Qubec Nickel Corp and Ceylon Graphite Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.