Correlation Between American Copper and NI Holdings

Can any of the company-specific risk be diversified away by investing in both American Copper and NI Holdings 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 American Copper and NI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Copper Development and NI Holdings, you can compare the effects of market volatilities on American Copper and NI Holdings 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 American Copper with a short position of NI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Copper and NI Holdings.

Diversification Opportunities for American Copper and NI Holdings

-0.32

Correlation Coefficient

American Copper  NI Holdings

Very good diversification

The 3 months correlation between American and NODK is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding American Copper Development and NI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NI Holdings and American Copper 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 American Copper Development are associated (or correlated) with NI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NI Holdings has no effect on the direction of American Copper i.e., American Copper and NI Holdings go up and down completely randomly.

Pair Corralation between American Copper and NI Holdings

Assuming the 90 days horizon American Copper Development is expected to generate 11.98 times more return on investment than NI Holdings. However, American Copper is 11.98 times more volatile than NI Holdings. It trades about 0.08 of its potential returns per unit of risk. NI Holdings is currently generating about 0.07 per unit of risk. If you would invest  2.60  in American Copper Development on September 5, 2024 and sell it today you would earn a total of  0.04  from holding American Copper Development or generate 1.54% return on investment over 90 days.

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

American Copper Development  vs.  NI Holdings

American Copper Deve

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Copper Development are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, American Copper reported solid returns over the last few months and may actually be approaching a breakup point.

NI Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NI Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, NI Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with American Copper and NI Holdings

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

The idea behind American Copper Development and NI 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.