Correlation Between Critical Elements and Fathom Nickel

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

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

Diversification Opportunities for Critical Elements and Fathom Nickel

-0.32

Correlation Coefficient

Critical Elements  Fathom Nickel

Very good diversification

The 3 months correlation between Critical and Fathom is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Critical Elements and Fathom Nickel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fathom Nickel and Critical Elements 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 Critical Elements are associated (or correlated) with Fathom Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fathom Nickel has no effect on the direction of Critical Elements i.e., Critical Elements and Fathom Nickel go up and down completely randomly.

Pair Corralation between Critical Elements and Fathom Nickel

Assuming the 90 days horizon Critical Elements is expected to generate 2.6 times less return on investment than Fathom Nickel. But when comparing it to its historical volatility, Critical Elements is 1.96 times less risky than Fathom Nickel. It trades about 0.09 of its potential returns per unit of risk. Fathom Nickel is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1.90  in Fathom Nickel on February 3, 2025 and sell it today you would earn a total of  1.05  from holding Fathom Nickel or generate 55.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Critical Elements  vs.  Fathom Nickel

Critical Elements

Risk-Adjusted Performance

Modest

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

Fathom Nickel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fathom Nickel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Fathom Nickel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Critical Elements and Fathom Nickel

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

The idea behind Critical Elements and Fathom Nickel 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.