Correlation Between Mineral Resources and Nickel Mines

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

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

Diversification Opportunities for Mineral Resources and Nickel Mines

0.61

Correlation Coefficient

Mineral Resources  Nickel Mines

Poor diversification

The 3 months correlation between Mineral and Nickel is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Mineral Resources Limited and Nickel Mines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nickel Mines Limited and Mineral Resources 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 Mineral Resources Limited are associated (or correlated) with Nickel Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nickel Mines Limited has no effect on the direction of Mineral Resources i.e., Mineral Resources and Nickel Mines go up and down completely randomly.

Pair Corralation between Mineral Resources and Nickel Mines

Assuming the 90 days horizon Mineral Resources Limited is expected to under-perform the Nickel Mines. In addition to that, Mineral Resources is 1.01 times more volatile than Nickel Mines Limited. It trades about -0.27 of its total potential returns per unit of risk. Nickel Mines Limited is currently generating about -0.12 per unit of volatility. If you would invest  60.00  in Nickel Mines Limited on September 12, 2024 and sell it today you would lose (5.00) from holding Nickel Mines Limited or give up 8.33% of portfolio value over 90 days.

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

Mineral Resources Limited  vs.  Nickel Mines Limited

Mineral Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nickel Mines Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mineral Resources and Nickel Mines

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

The idea behind Mineral Resources Limited and Nickel Mines Limited 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.