Correlation Between Teck Resources and Nephros

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

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

Diversification Opportunities for Teck Resources and Nephros

-0.9

Correlation Coefficient

Teck Resources  Nephros

Pay attention - limited upside

The 3 months correlation between Teck and Nephros is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Teck Resources Ltd and Nephros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nephros and Teck Resources 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 Teck Resources Ltd are associated (or correlated) with Nephros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nephros has no effect on the direction of Teck Resources i.e., Teck Resources and Nephros go up and down completely randomly.

Pair Corralation between Teck Resources and Nephros

Given the investment horizon of 90 days Teck Resources Ltd is expected to generate 0.59 times more return on investment than Nephros. However, Teck Resources Ltd is 1.69 times less risky than Nephros. It trades about 0.25 of its potential returns per unit of risk. Nephros is currently generating about -0.33 per unit of risk. If you would invest  3,782  in Teck Resources Ltd on January 18, 2024 and sell it today you would earn a total of  938.00  from holding Teck Resources Ltd or generate 24.8% return on investment over 90 days.

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

Teck Resources Ltd  vs.  Nephros

Teck Resources

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Teck Resources Ltd are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Teck Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Nephros

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nephros has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Teck Resources and Nephros

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

The idea behind Teck Resources Ltd and Nephros 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.