Correlation Between Québec Nickel and European Metals

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

Diversification Opportunities for Québec Nickel and European Metals

0.01

Correlation Coefficient

Québec Nickel  European Metals

Significant diversification

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

Pair Corralation between Québec Nickel and European Metals

Assuming the 90 days horizon Qubec Nickel Corp is expected to generate 2.81 times more return on investment than European Metals. However, Québec Nickel is 2.81 times more volatile than European Metals Holdings. It trades about -0.01 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.17 per unit of risk. If you would invest  8.00  in Qubec Nickel Corp on September 5, 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	100.0%
Values	Daily Returns

Qubec Nickel Corp  vs.  European Metals Holdings

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.

European Metals Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Metals Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Québec Nickel and European Metals

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

The idea behind Qubec Nickel Corp and European Metals Holdings 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.