Correlation Between Adriatic Metals and Nickel Mines

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

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

Diversification Opportunities for Adriatic Metals and Nickel Mines

0.57

Correlation Coefficient

Adriatic Metals  Nickel Mines

Very weak diversification

The 3 months correlation between Adriatic and Nickel is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Adriatic Metals PLC and Nickel Mines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nickel Mines Limited and Adriatic Metals 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 Adriatic Metals PLC are associated (or correlated) with Nickel Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nickel Mines Limited has no effect on the direction of Adriatic Metals i.e., Adriatic Metals and Nickel Mines go up and down completely randomly.

Pair Corralation between Adriatic Metals and Nickel Mines

Assuming the 90 days horizon Adriatic Metals PLC is expected to under-perform the Nickel Mines. But the pink sheet apears to be less risky and, when comparing its historical volatility, Adriatic Metals PLC is 1.28 times less risky than Nickel Mines. The pink sheet trades about -0.26 of its potential returns per unit of risk. The Nickel Mines Limited is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  62.00  in Nickel Mines Limited on September 5, 2024 and sell it today you would lose (7.00) from holding Nickel Mines Limited or give up 11.29% of portfolio value over 90 days.

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

Adriatic Metals PLC  vs.  Nickel Mines Limited

Adriatic Metals PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adriatic Metals PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Adriatic Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Nickel Mines Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nickel Mines Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Nickel Mines may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Adriatic Metals and Nickel Mines

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

The idea behind Adriatic Metals PLC and Nickel Mines 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.