Correlation Between Québec Nickel and South32

Can any of the company-specific risk be diversified away by investing in both Québec Nickel and South32 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 Québec Nickel and South32 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Qubec Nickel Corp and South32 Limited, you can compare the effects of market volatilities on Québec Nickel and South32 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 Québec Nickel with a short position of South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of Québec Nickel and South32.

Diversification Opportunities for Québec Nickel and South32

0.13

Correlation Coefficient

Québec Nickel  South32

Average diversification

The 3 months correlation between Québec and South32 is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Qubec Nickel Corp and South32 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 Limited and Québec Nickel 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 Qubec Nickel Corp are associated (or correlated) with South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 Limited has no effect on the direction of Québec Nickel i.e., Québec Nickel and South32 go up and down completely randomly.

Pair Corralation between Québec Nickel and South32

Assuming the 90 days horizon Qubec Nickel Corp is expected to under-perform the South32. In addition to that, Québec Nickel is 8.67 times more volatile than South32 Limited. It trades about -0.12 of its total potential returns per unit of risk. South32 Limited is currently generating about -0.1 per unit of volatility. If you would invest  240.00  in South32 Limited on September 5, 2024 and sell it today you would lose (13.00) from holding South32 Limited or give up 5.42% of portfolio value over 90 days.

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

Qubec Nickel Corp  vs.  South32 Limited

Qubec Nickel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qubec Nickel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

South32 Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in South32 Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, South32 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Québec Nickel and South32

The main advantage of trading using opposite Québec Nickel and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Québec Nickel position performs unexpectedly, South32 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 South32 will offset losses from the drop in South32's long position.

The idea behind Qubec Nickel Corp and South32 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.