Correlation Between Graphite One and Power Nickel

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

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

Diversification Opportunities for Graphite One and Power Nickel

0.15

Correlation Coefficient

Graphite One  Power Nickel

Average diversification

The 3 months correlation between Graphite and Power is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Graphite One and Power Nickel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Nickel and Graphite One 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 Graphite One are associated (or correlated) with Power Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Nickel has no effect on the direction of Graphite One i.e., Graphite One and Power Nickel go up and down completely randomly.

Pair Corralation between Graphite One and Power Nickel

Assuming the 90 days horizon Graphite One is expected to generate 3.83 times less return on investment than Power Nickel. But when comparing it to its historical volatility, Graphite One is 1.43 times less risky than Power Nickel. It trades about 0.03 of its potential returns per unit of risk. Power Nickel is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  46.00  in Power Nickel on August 31, 2024 and sell it today you would earn a total of  9.00  from holding Power Nickel or generate 19.57% return on investment over 90 days.

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

Graphite One  vs.  Power Nickel

Graphite One

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Graphite One are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Graphite One is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Power Nickel

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Power Nickel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Power Nickel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Graphite One and Power Nickel

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

The idea behind Graphite One and Power 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.