Correlation Between Bradda Head and FPX Nickel

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

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

Diversification Opportunities for Bradda Head and FPX Nickel

-0.64

Correlation Coefficient

Bradda Head  FPX Nickel

Excellent diversification

The 3 months correlation between Bradda and FPX is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bradda Head Lithium 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 Bradda Head 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 Bradda Head Lithium 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 Bradda Head i.e., Bradda Head and FPX Nickel go up and down completely randomly.

Pair Corralation between Bradda Head and FPX Nickel

Assuming the 90 days horizon Bradda Head Lithium is expected to generate 0.21 times more return on investment than FPX Nickel. However, Bradda Head Lithium is 4.87 times less risky than FPX Nickel. It trades about 0.13 of its potential returns per unit of risk. FPX Nickel Corp is currently generating about -0.05 per unit of risk. If you would invest  1.60  in Bradda Head Lithium on September 14, 2024 and sell it today you would earn a total of  0.11  from holding Bradda Head Lithium or generate 6.87% return on investment over 90 days.

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

Bradda Head Lithium  vs.  FPX Nickel Corp

Bradda Head Lithium

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bradda Head Lithium are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Bradda Head may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FPX Nickel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FPX 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 fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bradda Head and FPX Nickel

The main advantage of trading using opposite Bradda Head and FPX Nickel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bradda Head 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 Bradda Head Lithium 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.