Correlation Between Canadian Palladium and Boliden AB

Can any of the company-specific risk be diversified away by investing in both Canadian Palladium and Boliden AB 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 Canadian Palladium and Boliden AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canadian Palladium Resources and Boliden AB ADR, you can compare the effects of market volatilities on Canadian Palladium and Boliden AB 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 Canadian Palladium with a short position of Boliden AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Palladium and Boliden AB.

Diversification Opportunities for Canadian Palladium and Boliden AB

0.32

Correlation Coefficient

Canadian Palladium  Boliden AB

Weak diversification

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

Pair Corralation between Canadian Palladium and Boliden AB

Assuming the 90 days horizon Canadian Palladium Resources is expected to generate 4.91 times more return on investment than Boliden AB. However, Canadian Palladium is 4.91 times more volatile than Boliden AB ADR. It trades about 0.03 of its potential returns per unit of risk. Boliden AB ADR is currently generating about 0.03 per unit of risk. If you would invest  6.16  in Canadian Palladium Resources on September 15, 2024 and sell it today you would lose (1.09) from holding Canadian Palladium Resources or give up 17.69% of portfolio value over 90 days.

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

Canadian Palladium Resources  vs.  Boliden AB ADR

Canadian Palladium

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Palladium Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Canadian Palladium reported solid returns over the last few months and may actually be approaching a breakup point.

Boliden AB ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Boliden AB ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Boliden AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Canadian Palladium and Boliden AB

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

The idea behind Canadian Palladium Resources and Boliden AB ADR 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.