Correlation Between Global Li and Canada Nickel

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

By analyzing existing cross correlation between Global Li Ion Graphite and Canada Nickel, you can compare the effects of market volatilities on Global Li and Canada 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 Global Li with a short position of Canada Nickel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Li and Canada Nickel.

Diversification Opportunities for Global Li and Canada Nickel

0.53

Correlation Coefficient

Global Li  Canada Nickel

Very weak diversification

The 3 months correlation between Global and Canada is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Global Li Ion Graphite and Canada Nickel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canada Nickel and Global Li 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 Global Li Ion Graphite are associated (or correlated) with Canada Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canada Nickel has no effect on the direction of Global Li i.e., Global Li and Canada Nickel go up and down completely randomly.

Pair Corralation between Global Li and Canada Nickel

Assuming the 90 days horizon Global Li Ion Graphite is expected to generate 7.04 times more return on investment than Canada Nickel. However, Global Li is 7.04 times more volatile than Canada Nickel. It trades about 0.03 of its potential returns per unit of risk. Canada Nickel is currently generating about -0.15 per unit of risk. If you would invest  1.98  in Global Li Ion Graphite on September 14, 2024 and sell it today you would lose (0.72) from holding Global Li Ion Graphite or give up 36.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Global Li Ion Graphite  vs.  Canada Nickel

Global Li Ion

Risk-Adjusted Performance

2 of 100

Very Weak

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

Canada Nickel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canada Nickel 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 forward-looking signals 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 Global Li and Canada Nickel

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

The idea behind Global Li Ion Graphite and Canada Nickel 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 Anywhere module to track or share privately all of your investments from the convenience of any device.