Correlation Between NioCorp Developments and Valeura Energy

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

Diversification Opportunities for NioCorp Developments and Valeura Energy

-0.68

Correlation Coefficient

NioCorp Developments  Valeura Energy

Excellent diversification

The 3 months correlation between NioCorp and Valeura is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding NioCorp Developments Ltd and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura Energy 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 Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of NioCorp Developments i.e., NioCorp Developments and Valeura Energy go up and down completely randomly.

Pair Corralation between NioCorp Developments and Valeura Energy

Allowing for the 90-day total investment horizon NioCorp Developments Ltd is expected to under-perform the Valeura Energy. But the stock apears to be less risky and, when comparing its historical volatility, NioCorp Developments Ltd is 1.15 times less risky than Valeura Energy. The stock trades about -0.37 of its potential returns per unit of risk. The Valeura Energy is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  320.00  in Valeura Energy on September 1, 2024 and sell it today you would earn a total of  67.00  from holding Valeura Energy or generate 20.94% return on investment over 90 days.

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

NioCorp Developments Ltd  vs.  Valeura Energy

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.

Valeura Energy

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with NioCorp Developments and Valeura Energy

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

The idea behind NioCorp Developments Ltd and Valeura Energy 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.