Correlation Between Compass Minerals and NioCorp Developments

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

Diversification Opportunities for Compass Minerals and NioCorp Developments

-0.48

Correlation Coefficient

Compass Minerals  NioCorp Developments

Very good diversification

The 3 months correlation between Compass and NioCorp is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Compass Minerals International and NioCorp Developments Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NioCorp Developments and Compass 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 Compass Minerals International 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 Compass Minerals i.e., Compass Minerals and NioCorp Developments go up and down completely randomly.

Pair Corralation between Compass Minerals and NioCorp Developments

Considering the 90-day investment horizon Compass Minerals International is expected to generate 0.91 times more return on investment than NioCorp Developments. However, Compass Minerals International is 1.1 times less risky than NioCorp Developments. It trades about 0.14 of its potential returns per unit of risk. NioCorp Developments Ltd is currently generating about -0.01 per unit of risk. If you would invest  942.00  in Compass Minerals International on September 13, 2024 and sell it today you would earn a total of  417.00  from holding Compass Minerals International or generate 44.27% return on investment over 90 days.

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

Compass Minerals International  vs.  NioCorp Developments Ltd

Compass Minerals Int

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Minerals International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, Compass 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 Compass Minerals and NioCorp Developments

The main advantage of trading using opposite Compass Minerals and NioCorp Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass 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 Compass Minerals International 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..