Correlation Between NioCorp Developments and Compass Minerals

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

Diversification Opportunities for NioCorp Developments and Compass Minerals

-0.41

Correlation Coefficient

NioCorp Developments  Compass Minerals

Very good diversification

The 3 months correlation between NioCorp and Compass is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding NioCorp Developments Ltd and Compass Minerals International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Minerals Int 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 Compass Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Minerals Int has no effect on the direction of NioCorp Developments i.e., NioCorp Developments and Compass Minerals go up and down completely randomly.

Pair Corralation between NioCorp Developments and Compass Minerals

Allowing for the 90-day total investment horizon NioCorp Developments Ltd is expected to generate 1.79 times more return on investment than Compass Minerals. However, NioCorp Developments is 1.79 times more volatile than Compass Minerals International. It trades about 0.18 of its potential returns per unit of risk. Compass Minerals International is currently generating about -0.13 per unit of risk. If you would invest  141.00  in NioCorp Developments Ltd on November 19, 2024 and sell it today you would earn a total of  92.00  from holding NioCorp Developments Ltd or generate 65.25% 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.  Compass Minerals International

NioCorp Developments

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NioCorp Developments Ltd are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, NioCorp Developments sustained solid returns over the last few months and may actually be approaching a breakup point.

Compass Minerals Int

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compass Minerals International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with NioCorp Developments and Compass Minerals

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

The idea behind NioCorp Developments Ltd and Compass Minerals International 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.