Correlation Between Electra Battery and NioCorp Developments

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

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

Diversification Opportunities for Electra Battery and NioCorp Developments

0.53

Correlation Coefficient

Electra Battery  NioCorp Developments

Very weak diversification

The 3 months correlation between Electra and NioCorp is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials and NioCorp Developments Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NioCorp Developments and Electra Battery 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 Electra Battery Materials 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 Electra Battery i.e., Electra Battery and NioCorp Developments go up and down completely randomly.

Pair Corralation between Electra Battery and NioCorp Developments

Given the investment horizon of 90 days Electra Battery Materials is expected to under-perform the NioCorp Developments. But the stock apears to be less risky and, when comparing its historical volatility, Electra Battery Materials is 1.5 times less risky than NioCorp Developments. The stock trades about -0.15 of its potential returns per unit of risk. The NioCorp Developments Ltd is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  172.00  in NioCorp Developments Ltd on September 13, 2024 and sell it today you would lose (22.00) from holding NioCorp Developments Ltd or give up 12.79% of portfolio value over 90 days.

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

Electra Battery Materials  vs.  NioCorp Developments Ltd

Electra Battery Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electra Battery Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 somewhat strong fundamental drivers, NioCorp Developments is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Electra Battery and NioCorp Developments

The main advantage of trading using opposite Electra Battery and NioCorp Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electra Battery 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 Electra Battery Materials 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.