Correlation Between Freedom Bank and NioCorp Developments

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

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

Diversification Opportunities for Freedom Bank and NioCorp Developments

0.21

Correlation Coefficient

Freedom Bank  NioCorp Developments

Modest diversification

The 3 months correlation between Freedom and NioCorp is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Bank of and NioCorp Developments Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NioCorp Developments and Freedom Bank 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 Freedom Bank of 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 Freedom Bank i.e., Freedom Bank and NioCorp Developments go up and down completely randomly.

Pair Corralation between Freedom Bank and NioCorp Developments

Given the investment horizon of 90 days Freedom Bank of is expected to generate 0.21 times more return on investment than NioCorp Developments. However, Freedom Bank of is 4.78 times less risky than NioCorp Developments. It trades about 0.07 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  1,050  in Freedom Bank of on September 12, 2024 and sell it today you would earn a total of  51.00  from holding Freedom Bank of or generate 4.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Freedom Bank of  vs.  NioCorp Developments Ltd

Freedom Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Bank of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Freedom Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Freedom Bank and NioCorp Developments

The main advantage of trading using opposite Freedom Bank and NioCorp Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Bank 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 Freedom Bank of 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.