Correlation Between Murchison Minerals and NioCorp Developments

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

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

Diversification Opportunities for Murchison Minerals and NioCorp Developments

0.38

Correlation Coefficient

Murchison Minerals  NioCorp Developments

Weak diversification

The 3 months correlation between Murchison and NioCorp is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Murchison Minerals and NioCorp Developments Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NioCorp Developments and Murchison Minerals 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 Murchison Minerals 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 Murchison Minerals i.e., Murchison Minerals and NioCorp Developments go up and down completely randomly.

Pair Corralation between Murchison Minerals and NioCorp Developments

Assuming the 90 days horizon Murchison Minerals is expected to generate 2.05 times more return on investment than NioCorp Developments. However, Murchison Minerals is 2.05 times more volatile than NioCorp Developments Ltd. It trades about 0.1 of its potential returns per unit of risk. NioCorp Developments Ltd is currently generating about 0.0 per unit of risk. If you would invest  0.75  in Murchison Minerals on September 5, 2024 and sell it today you would earn a total of  0.29  from holding Murchison Minerals or generate 38.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Murchison Minerals  vs.  NioCorp Developments Ltd

Murchison Minerals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Murchison Minerals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Murchison Minerals 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 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 Murchison Minerals and NioCorp Developments

The main advantage of trading using opposite Murchison Minerals and NioCorp Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Murchison Minerals 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 Murchison Minerals 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.