Correlation Between Banco De and Premium Nickel

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

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

Diversification Opportunities for Banco De and Premium Nickel

0.7

Correlation Coefficient

Banco De  Premium Nickel

Poor diversification

The 3 months correlation between Banco and Premium is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Banco De Chile and Premium Nickel Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Nickel Resources and Banco De 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 Banco De Chile are associated (or correlated) with Premium Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Nickel Resources has no effect on the direction of Banco De i.e., Banco De and Premium Nickel go up and down completely randomly.

Pair Corralation between Banco De and Premium Nickel

Considering the 90-day investment horizon Banco De Chile is expected to generate 0.25 times more return on investment than Premium Nickel. However, Banco De Chile is 3.99 times less risky than Premium Nickel. It trades about 0.05 of its potential returns per unit of risk. Premium Nickel Resources is currently generating about -0.05 per unit of risk. If you would invest  2,011  in Banco De Chile on September 15, 2024 and sell it today you would earn a total of  342.00  from holding Banco De Chile or generate 17.01% return on investment over 90 days.

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

Banco De Chile  vs.  Premium Nickel Resources

Banco De Chile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco De Chile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Banco De is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Premium Nickel Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Premium Nickel Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Premium Nickel is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Banco De and Premium Nickel

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

The idea behind Banco De Chile and Premium Nickel Resources 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.