Correlation Between Nickel Mines and AXP Energy

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

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

Diversification Opportunities for Nickel Mines and AXP Energy

-0.58

Correlation Coefficient

Nickel Mines  AXP Energy

Excellent diversification

The 3 months correlation between Nickel and AXP is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Nickel Mines Limited and AXP Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXP Energy and Nickel Mines 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 Nickel Mines Limited are associated (or correlated) with AXP Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXP Energy has no effect on the direction of Nickel Mines i.e., Nickel Mines and AXP Energy go up and down completely randomly.

Pair Corralation between Nickel Mines and AXP Energy

Assuming the 90 days horizon Nickel Mines Limited is expected to under-perform the AXP Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nickel Mines Limited is 5.35 times less risky than AXP Energy. The pink sheet trades about -0.02 of its potential returns per unit of risk. The AXP Energy is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.05  in AXP Energy on September 16, 2024 and sell it today you would earn a total of  0.05  from holding AXP Energy or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

Nickel Mines Limited  vs.  AXP Energy

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.

AXP Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AXP Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AXP Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nickel Mines and AXP Energy

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

The idea behind Nickel Mines Limited and AXP Energy 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.