Correlation Between NioCorp Developments and Murchison Minerals

Can any of the company-specific risk be diversified away by investing in both NioCorp Developments and Murchison Minerals 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 Murchison Minerals 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 Murchison Minerals, you can compare the effects of market volatilities on NioCorp Developments and Murchison Minerals 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 Murchison Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of NioCorp Developments and Murchison Minerals.

Diversification Opportunities for NioCorp Developments and Murchison Minerals

0.38

Correlation Coefficient

NioCorp Developments  Murchison Minerals

Weak diversification

The 3 months correlation between NioCorp and Murchison is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding NioCorp Developments Ltd and Murchison Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murchison Minerals 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 Murchison Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murchison Minerals has no effect on the direction of NioCorp Developments i.e., NioCorp Developments and Murchison Minerals go up and down completely randomly.

Pair Corralation between NioCorp Developments and Murchison Minerals

Allowing for the 90-day total investment horizon NioCorp Developments Ltd is expected to under-perform the Murchison Minerals. But the stock apears to be less risky and, when comparing its historical volatility, NioCorp Developments Ltd is 2.05 times less risky than Murchison Minerals. The stock trades about 0.0 of its potential returns per unit of risk. The Murchison Minerals is currently generating about 0.1 of returns per unit of risk over similar time horizon. 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

NioCorp Developments Ltd  vs.  Murchison Minerals

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.

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.

Pair Trading with NioCorp Developments and Murchison Minerals

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

The idea behind NioCorp Developments Ltd and Murchison Minerals 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.