Correlation Between Fortescue Metals and Nickel Mines
Can any of the company-specific risk be diversified away by investing in both Fortescue Metals 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 Fortescue Metals and Nickel Mines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortescue Metals Group and Nickel Mines Limited, you can compare the effects of market volatilities on Fortescue Metals 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 Fortescue Metals with a short position of Nickel Mines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortescue Metals and Nickel Mines.
Diversification Opportunities for Fortescue Metals and Nickel Mines
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fortescue and Nickel is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group 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 Fortescue Metals 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 Fortescue Metals Group 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 Fortescue Metals i.e., Fortescue Metals and Nickel Mines go up and down completely randomly.
Pair Corralation between Fortescue Metals and Nickel Mines
Assuming the 90 days horizon Fortescue Metals Group is expected to generate 0.79 times more return on investment than Nickel Mines. However, Fortescue Metals Group is 1.26 times less risky than Nickel Mines. It trades about -0.01 of its potential returns per unit of risk. Nickel Mines Limited is currently generating about -0.16 per unit of risk. If you would invest 2,497 in Fortescue Metals Group on September 1, 2024 and sell it today you would lose (26.00) from holding Fortescue Metals Group or give up 1.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Fortescue Metals Group vs. Nickel Mines Limited
Performance |
| Timeline |
| Fortescue Metals |
| Nickel Mines Limited |
Fortescue Metals and Nickel Mines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortescue Metals and Nickel Mines
The main advantage of trading using opposite Fortescue Metals and Nickel Mines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortescue Metals 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.| Fortescue Metals vs. IGO Limited | Fortescue Metals vs. Qubec Nickel Corp | Fortescue Metals vs. IGO Limited | Fortescue Metals vs. Hannan Metals |
| Nickel Mines vs. IGO Limited | Nickel Mines vs. Qubec Nickel Corp | Nickel Mines vs. Mineral Resources Limited | Nickel Mines vs. Surge Copper Corp |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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