Correlation Between Nicola Mining and ExGen Resources

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

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

Diversification Opportunities for Nicola Mining and ExGen Resources

0.28

Correlation Coefficient

Nicola Mining  ExGen Resources

Modest diversification

The 3 months correlation between Nicola and ExGen is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Nicola Mining and ExGen Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ExGen Resources and Nicola Mining 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 Nicola Mining are associated (or correlated) with ExGen Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ExGen Resources has no effect on the direction of Nicola Mining i.e., Nicola Mining and ExGen Resources go up and down completely randomly.

Pair Corralation between Nicola Mining and ExGen Resources

Assuming the 90 days horizon Nicola Mining is expected to under-perform the ExGen Resources. But the stock apears to be less risky and, when comparing its historical volatility, Nicola Mining is 1.96 times less risky than ExGen Resources. The stock trades about -0.01 of its potential returns per unit of risk. The ExGen Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  8.00  in ExGen Resources on September 15, 2024 and sell it today you would lose (1.00) from holding ExGen Resources or give up 12.5% of portfolio value over 90 days.

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

Nicola Mining  vs.  ExGen Resources

Nicola Mining

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Nicola Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Nicola Mining is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ExGen Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ExGen Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ExGen Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nicola Mining and ExGen Resources

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

The idea behind Nicola Mining and ExGen Resources 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..