Correlation Between Canadian Palladium and NorthIsle Copper

Can any of the company-specific risk be diversified away by investing in both Canadian Palladium and NorthIsle Copper 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 NorthIsle Copper 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 NorthIsle Copper and, you can compare the effects of market volatilities on Canadian Palladium and NorthIsle Copper 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 NorthIsle Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Palladium and NorthIsle Copper.

Diversification Opportunities for Canadian Palladium and NorthIsle Copper

0.19

Correlation Coefficient

Canadian Palladium  NorthIsle Copper

Average diversification

The 3 months correlation between Canadian and NorthIsle is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Palladium Resources and NorthIsle Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthIsle Copper 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 NorthIsle Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorthIsle Copper has no effect on the direction of Canadian Palladium i.e., Canadian Palladium and NorthIsle Copper go up and down completely randomly.

Pair Corralation between Canadian Palladium and NorthIsle Copper

Assuming the 90 days horizon Canadian Palladium Resources is expected to under-perform the NorthIsle Copper. In addition to that, Canadian Palladium is 2.15 times more volatile than NorthIsle Copper and. It trades about -0.01 of its total potential returns per unit of risk. NorthIsle Copper and is currently generating about 0.01 per unit of volatility. If you would invest  34.00  in NorthIsle Copper and on September 4, 2024 and sell it today you would lose (2.00) from holding NorthIsle Copper and or give up 5.88% of portfolio value over 90 days.

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

Canadian Palladium Resources  vs.  NorthIsle Copper and

Canadian Palladium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Palladium Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

NorthIsle Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NorthIsle Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NorthIsle Copper is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Canadian Palladium and NorthIsle Copper

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

The idea behind Canadian Palladium Resources and NorthIsle Copper and 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.