Correlation Between FPX Nickel and International Lithium
Can any of the company-specific risk be diversified away by investing in both FPX Nickel and International Lithium 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 FPX Nickel and International Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FPX Nickel Corp and International Lithium Corp, you can compare the effects of market volatilities on FPX Nickel and International Lithium 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 FPX Nickel with a short position of International Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of FPX Nickel and International Lithium.
Diversification Opportunities for FPX Nickel and International Lithium
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between FPX and International is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding FPX Nickel Corp and International Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Lithium and FPX 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 FPX Nickel Corp are associated (or correlated) with International Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Lithium has no effect on the direction of FPX Nickel i.e., FPX Nickel and International Lithium go up and down completely randomly.
Pair Corralation between FPX Nickel and International Lithium
Assuming the 90 days horizon FPX Nickel Corp is expected to under-perform the International Lithium. But the otc stock apears to be less risky and, when comparing its historical volatility, FPX Nickel Corp is 2.53 times less risky than International Lithium. The otc stock trades about -0.05 of its potential returns per unit of risk. The International Lithium Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1.50 in International Lithium Corp on September 3, 2024 and sell it today you would lose (0.20) from holding International Lithium Corp or give up 13.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FPX Nickel Corp vs. International Lithium Corp
Performance |
| Timeline |
| FPX Nickel Corp |
| International Lithium |
FPX Nickel and International Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FPX Nickel and International Lithium
The main advantage of trading using opposite FPX Nickel and International Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FPX Nickel position performs unexpectedly, International Lithium 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 International Lithium will offset losses from the drop in International Lithium's long position.| FPX Nickel vs. Oroco Resource Corp | FPX Nickel vs. Syrah Resources Limited | FPX Nickel vs. Graphite One | FPX Nickel vs. Westwater Resources |
| International Lithium vs. Qubec Nickel Corp | International Lithium vs. IGO Limited | International Lithium vs. Avarone Metals | International Lithium vs. Adriatic Metals PLC |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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