Correlation Between Western Investment and FPX Nickel

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

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

Diversification Opportunities for Western Investment and FPX Nickel

0.04

Correlation Coefficient

Western Investment  FPX Nickel

Significant diversification

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

Pair Corralation between Western Investment and FPX Nickel

Given the investment horizon of 90 days Western Investment is expected to generate 2.67 times less return on investment than FPX Nickel. But when comparing it to its historical volatility, Western Investment is 1.03 times less risky than FPX Nickel. It trades about 0.01 of its potential returns per unit of risk. FPX Nickel Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  24.00  in FPX Nickel Corp on December 27, 2024 and sell it today you would earn a total of  1.00  from holding FPX Nickel Corp or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Western Investment  vs.  FPX Nickel Corp

Western Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Western Investment is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

FPX Nickel Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FPX Nickel Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, FPX Nickel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Western Investment and FPX Nickel

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

The idea behind Western Investment and FPX Nickel 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.