Correlation Between Fathom Nickel and Magna Mining

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

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

Diversification Opportunities for Fathom Nickel and Magna Mining

0.06

Correlation Coefficient

Fathom Nickel  Magna Mining

Significant diversification

The 3 months correlation between Fathom and Magna is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Fathom Nickel and Magna Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna Mining and Fathom 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 Fathom Nickel are associated (or correlated) with Magna Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna Mining has no effect on the direction of Fathom Nickel i.e., Fathom Nickel and Magna Mining go up and down completely randomly.

Pair Corralation between Fathom Nickel and Magna Mining

Assuming the 90 days horizon Fathom Nickel is expected to generate 4.32 times more return on investment than Magna Mining. However, Fathom Nickel is 4.32 times more volatile than Magna Mining. It trades about 0.12 of its potential returns per unit of risk. Magna Mining is currently generating about -0.17 per unit of risk. If you would invest  1.89  in Fathom Nickel on January 9, 2025 and sell it today you would earn a total of  0.28  from holding Fathom Nickel or generate 14.81% return on investment over 90 days.

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

Fathom Nickel  vs.  Magna Mining

Fathom Nickel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fathom Nickel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Fathom Nickel reported solid returns over the last few months and may actually be approaching a breakup point.

Magna Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magna Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Fathom Nickel and Magna Mining

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

The idea behind Fathom Nickel and Magna Mining 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.