Correlation Between Adriatic Metals and NioCorp Developments

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

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

Diversification Opportunities for Adriatic Metals and NioCorp Developments

-0.12

Correlation Coefficient

Adriatic Metals  NioCorp Developments

Good diversification

The 3 months correlation between Adriatic and NioCorp is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Adriatic Metals PLC and NioCorp Developments Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NioCorp Developments and Adriatic Metals 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 Adriatic Metals PLC are associated (or correlated) with NioCorp Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NioCorp Developments has no effect on the direction of Adriatic Metals i.e., Adriatic Metals and NioCorp Developments go up and down completely randomly.

Pair Corralation between Adriatic Metals and NioCorp Developments

Assuming the 90 days horizon Adriatic Metals is expected to generate 1.51 times less return on investment than NioCorp Developments. But when comparing it to its historical volatility, Adriatic Metals PLC is 3.39 times less risky than NioCorp Developments. It trades about 0.12 of its potential returns per unit of risk. NioCorp Developments Ltd is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  141.00  in NioCorp Developments Ltd on September 15, 2024 and sell it today you would earn a total of  5.00  from holding NioCorp Developments Ltd or generate 3.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Adriatic Metals PLC  vs.  NioCorp Developments Ltd

Adriatic Metals PLC

Risk-Adjusted Performance

9 of 100

OK

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

NioCorp Developments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NioCorp Developments Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Adriatic Metals and NioCorp Developments

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

The idea behind Adriatic Metals PLC and NioCorp Developments Ltd 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.