Correlation Between First Quantum and Nutrien

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

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

Diversification Opportunities for First Quantum and Nutrien

0.74

Correlation Coefficient

First Quantum  Nutrien

Poor diversification

The 3 months correlation between First and Nutrien is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding First Quantum Minerals and Nutrien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutrien and First Quantum 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 First Quantum Minerals are associated (or correlated) with Nutrien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nutrien has no effect on the direction of First Quantum i.e., First Quantum and Nutrien go up and down completely randomly.

Pair Corralation between First Quantum and Nutrien

Assuming the 90 days horizon First Quantum is expected to generate 11.94 times less return on investment than Nutrien. In addition to that, First Quantum is 2.5 times more volatile than Nutrien. It trades about 0.01 of its total potential returns per unit of risk. Nutrien is currently generating about 0.31 per unit of volatility. If you would invest  7,183  in Nutrien on February 26, 2024 and sell it today you would earn a total of  861.00  from holding Nutrien or generate 11.99% return on investment over 90 days.

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

First Quantum Minerals  vs.  Nutrien

First Quantum Minerals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Quantum Minerals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, First Quantum displayed solid returns over the last few months and may actually be approaching a breakup point.

Nutrien

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nutrien are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Nutrien may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with First Quantum and Nutrien

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

The idea behind First Quantum Minerals and Nutrien 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.