Correlation Between US Financial and Nickel Creek
Can any of the company-specific risk be diversified away by investing in both US Financial and Nickel Creek 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 US Financial and Nickel Creek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Financial 15 and Nickel Creek Platinum, you can compare the effects of market volatilities on US Financial and Nickel Creek 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 US Financial with a short position of Nickel Creek. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Financial and Nickel Creek.
Diversification Opportunities for US Financial and Nickel Creek
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FTU and Nickel is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding US Financial 15 and Nickel Creek Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nickel Creek Platinum and US Financial 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 US Financial 15 are associated (or correlated) with Nickel Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nickel Creek Platinum has no effect on the direction of US Financial i.e., US Financial and Nickel Creek go up and down completely randomly.
Pair Corralation between US Financial and Nickel Creek
Assuming the 90 days trading horizon US Financial 15 is expected to generate 6.35 times more return on investment than Nickel Creek. However, US Financial is 6.35 times more volatile than Nickel Creek Platinum. It trades about 0.3 of its potential returns per unit of risk. Nickel Creek Platinum is currently generating about 0.07 per unit of risk. If you would invest 36.00 in US Financial 15 on August 27, 2024 and sell it today you would earn a total of 32.00 from holding US Financial 15 or generate 88.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Financial 15 vs. Nickel Creek Platinum
Performance |
| Timeline |
| US Financial 15 |
| Nickel Creek Platinum |
US Financial and Nickel Creek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Financial and Nickel Creek
The main advantage of trading using opposite US Financial and Nickel Creek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Financial position performs unexpectedly, Nickel Creek 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 Creek will offset losses from the drop in Nickel Creek's long position.| US Financial vs. NVIDIA CDR | US Financial vs. Apple Inc CDR | US Financial vs. Microsoft Corp CDR | US Financial vs. Amazon CDR |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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