Correlation Between NioCorp Developments and CECO Environmental

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

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

Diversification Opportunities for NioCorp Developments and CECO Environmental

-0.22

Correlation Coefficient

NioCorp Developments  CECO Environmental

Very good diversification

The 3 months correlation between NioCorp and CECO is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding NioCorp Developments Ltd and CECO Environmental Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO Environmental Corp and NioCorp Developments 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 NioCorp Developments Ltd are associated (or correlated) with CECO Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CECO Environmental Corp has no effect on the direction of NioCorp Developments i.e., NioCorp Developments and CECO Environmental go up and down completely randomly.

Pair Corralation between NioCorp Developments and CECO Environmental

Allowing for the 90-day total investment horizon NioCorp Developments Ltd is expected to under-perform the CECO Environmental. In addition to that, NioCorp Developments is 1.25 times more volatile than CECO Environmental Corp. It trades about -0.37 of its total potential returns per unit of risk. CECO Environmental Corp is currently generating about 0.48 per unit of volatility. If you would invest  2,380  in CECO Environmental Corp on September 1, 2024 and sell it today you would earn a total of  825.00  from holding CECO Environmental Corp or generate 34.66% return on investment over 90 days.

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

NioCorp Developments Ltd  vs.  CECO Environmental Corp

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 weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

CECO Environmental Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, CECO Environmental displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NioCorp Developments and CECO Environmental

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

The idea behind NioCorp Developments Ltd and CECO Environmental Corp 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.