Correlation Between SPACE and NioCorp Developments

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

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

Diversification Opportunities for SPACE and NioCorp Developments

-0.64

Correlation Coefficient

SPACE  NioCorp Developments

Excellent diversification

The 3 months correlation between SPACE and NioCorp is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and NioCorp Developments Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NioCorp Developments and SPACE 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 SPACE 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 SPACE i.e., SPACE and NioCorp Developments go up and down completely randomly.

Pair Corralation between SPACE and NioCorp Developments

Assuming the 90 days horizon SPACE is expected to generate 1.02 times more return on investment than NioCorp Developments. However, SPACE is 1.02 times more volatile than NioCorp Developments Ltd. It trades about 0.21 of its potential returns per unit of risk. NioCorp Developments Ltd is currently generating about -0.07 per unit of risk. If you would invest  33.00  in SPACE on September 2, 2024 and sell it today you would earn a total of  26.00  from holding SPACE or generate 78.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.97%
Values	Daily Returns

SPACE  vs.  NioCorp Developments Ltd

SPACE

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SPACE exhibited 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 conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with SPACE and NioCorp Developments

The main advantage of trading using opposite SPACE and NioCorp Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPACE 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 SPACE 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.