Correlation Between NioCorp Developments and Newpark Resources

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

Diversification Opportunities for NioCorp Developments and Newpark Resources

-0.46

Correlation Coefficient

NioCorp Developments  Newpark Resources

Very good diversification

The 3 months correlation between NioCorp and Newpark is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding NioCorp Developments Ltd and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources 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 Newpark Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newpark Resources has no effect on the direction of NioCorp Developments i.e., NioCorp Developments and Newpark Resources go up and down completely randomly.

Pair Corralation between NioCorp Developments and Newpark Resources

Allowing for the 90-day total investment horizon NioCorp Developments Ltd is expected to under-perform the Newpark Resources. In addition to that, NioCorp Developments is 1.25 times more volatile than Newpark Resources. It trades about -0.37 of its total potential returns per unit of risk. Newpark Resources is currently generating about 0.37 per unit of volatility. If you would invest  666.00  in Newpark Resources on September 1, 2024 and sell it today you would earn a total of  170.00  from holding Newpark Resources or generate 25.53% return on investment over 90 days.

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

NioCorp Developments Ltd  vs.  Newpark Resources

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.

Newpark Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Newpark Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Newpark Resources may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with NioCorp Developments and Newpark Resources

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

The idea behind NioCorp Developments Ltd and Newpark Resources 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.