Correlation Between SPC Nickel and Lotus Resources

Can any of the company-specific risk be diversified away by investing in both SPC Nickel and Lotus 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 SPC Nickel and Lotus Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPC Nickel Corp and Lotus Resources Limited, you can compare the effects of market volatilities on SPC Nickel and Lotus 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 SPC Nickel with a short position of Lotus Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPC Nickel and Lotus Resources.

Diversification Opportunities for SPC Nickel and Lotus Resources

0.28

Correlation Coefficient

SPC Nickel  Lotus Resources

Modest diversification

The 3 months correlation between SPC and Lotus is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding SPC Nickel Corp and Lotus Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Resources and SPC 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 SPC Nickel Corp are associated (or correlated) with Lotus Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Resources has no effect on the direction of SPC Nickel i.e., SPC Nickel and Lotus Resources go up and down completely randomly.

Pair Corralation between SPC Nickel and Lotus Resources

Assuming the 90 days horizon SPC Nickel Corp is expected to under-perform the Lotus Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, SPC Nickel Corp is 1.4 times less risky than Lotus Resources. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Lotus Resources Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Lotus Resources Limited on December 28, 2024 and sell it today you would lose (1.00) from holding Lotus Resources Limited or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

SPC Nickel Corp  vs.  Lotus Resources Limited

SPC Nickel Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPC Nickel Corp 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Lotus Resources

Risk-Adjusted Performance

Weak

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

Pair Trading with SPC Nickel and Lotus Resources

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

The idea behind SPC Nickel Corp and Lotus Resources Limited 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.