Correlation Between Québec Nickel and Lithium Energi

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

Diversification Opportunities for Québec Nickel and Lithium Energi

-0.18

Correlation Coefficient

Québec Nickel  Lithium Energi

Good diversification

The 3 months correlation between Québec and Lithium is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Qubec Nickel Corp and Lithium Energi Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Energi Explo 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 Lithium Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Energi Explo has no effect on the direction of Québec Nickel i.e., Québec Nickel and Lithium Energi go up and down completely randomly.

Pair Corralation between Québec Nickel and Lithium Energi

Assuming the 90 days horizon Qubec Nickel Corp is expected to generate 2.83 times more return on investment than Lithium Energi. However, Québec Nickel is 2.83 times more volatile than Lithium Energi Exploration. It trades about 0.13 of its potential returns per unit of risk. Lithium Energi Exploration is currently generating about 0.07 per unit of risk. If you would invest  1.75  in Qubec Nickel Corp on December 3, 2024 and sell it today you would earn a total of  4.69  from holding Qubec Nickel Corp or generate 268.0% return on investment over 90 days.

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

Qubec Nickel Corp  vs.  Lithium Energi Exploration

Qubec Nickel Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qubec Nickel Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Québec Nickel reported solid returns over the last few months and may actually be approaching a breakup point.

Lithium Energi Explo

Risk-Adjusted Performance

Modest

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

Pair Trading with Québec Nickel and Lithium Energi

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

The idea behind Qubec Nickel Corp and Lithium Energi Exploration 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.