Correlation Between Flying Nickel and FPX Nickel

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

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

Diversification Opportunities for Flying Nickel and FPX Nickel

0.24

Correlation Coefficient

Flying Nickel  FPX Nickel

Modest diversification

The 3 months correlation between Flying and FPX is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Flying Nickel Mining 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 Flying Nickel 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 Flying Nickel Mining 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 Flying Nickel i.e., Flying Nickel and FPX Nickel go up and down completely randomly.

Pair Corralation between Flying Nickel and FPX Nickel

Assuming the 90 days trading horizon Flying Nickel Mining is expected to generate 2.99 times more return on investment than FPX Nickel. However, Flying Nickel is 2.99 times more volatile than FPX Nickel Corp. It trades about 0.04 of its potential returns per unit of risk. FPX Nickel Corp is currently generating about 0.02 per unit of risk. If you would invest  5.50  in Flying Nickel Mining on September 4, 2024 and sell it today you would lose (0.50) from holding Flying Nickel Mining or give up 9.09% of portfolio value over 90 days.

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

Flying Nickel Mining  vs.  FPX Nickel Corp

Flying Nickel Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Flying Nickel Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Flying Nickel showed solid returns over the last few months and may actually be approaching a breakup point.

FPX Nickel Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FPX Nickel Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, FPX Nickel is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Flying Nickel and FPX Nickel

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