Correlation Between FPX Nickel and Talon Metals

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

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

Diversification Opportunities for FPX Nickel and Talon Metals

0.48

Correlation Coefficient

FPX Nickel  Talon Metals

Very weak diversification

The 3 months correlation between FPX and Talon is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding FPX Nickel Corp and Talon Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talon Metals Corp and FPX 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 FPX Nickel Corp are associated (or correlated) with Talon Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talon Metals Corp has no effect on the direction of FPX Nickel i.e., FPX Nickel and Talon Metals go up and down completely randomly.

Pair Corralation between FPX Nickel and Talon Metals

Assuming the 90 days horizon FPX Nickel Corp is expected to under-perform the Talon Metals. In addition to that, FPX Nickel is 1.67 times more volatile than Talon Metals Corp. It trades about -0.08 of its total potential returns per unit of risk. Talon Metals Corp is currently generating about 0.04 per unit of volatility. If you would invest  6.10  in Talon Metals Corp on September 12, 2024 and sell it today you would earn a total of  0.10  from holding Talon Metals Corp or generate 1.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

FPX Nickel Corp  vs.  Talon Metals Corp

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 nearly stable fundamental indicators, FPX Nickel is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Talon Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with FPX Nickel and Talon Metals

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

The idea behind FPX Nickel Corp and Talon Metals 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.