Correlation Between Huntsman Exploration and NioCorp Developments

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

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

Diversification Opportunities for Huntsman Exploration and NioCorp Developments

0.56

Correlation Coefficient

Huntsman Exploration  NioCorp Developments

Very weak diversification

The 3 months correlation between Huntsman and NioCorp is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Huntsman Exploration and NioCorp Developments Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NioCorp Developments and Huntsman Exploration 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 Huntsman Exploration 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 Huntsman Exploration i.e., Huntsman Exploration and NioCorp Developments go up and down completely randomly.

Pair Corralation between Huntsman Exploration and NioCorp Developments

Assuming the 90 days horizon Huntsman Exploration is expected to under-perform the NioCorp Developments. In addition to that, Huntsman Exploration is 1.57 times more volatile than NioCorp Developments Ltd. It trades about -0.17 of its total potential returns per unit of risk. NioCorp Developments Ltd is currently generating about -0.02 per unit of volatility. If you would invest  172.00  in NioCorp Developments Ltd on September 15, 2024 and sell it today you would lose (26.00) from holding NioCorp Developments Ltd or give up 15.12% of portfolio value over 90 days.

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

Huntsman Exploration  vs.  NioCorp Developments Ltd

Huntsman Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huntsman Exploration 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 primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 Huntsman Exploration and NioCorp Developments

The main advantage of trading using opposite Huntsman Exploration and NioCorp Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huntsman Exploration 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 Huntsman Exploration 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.