Correlation Between NioCorp Developments and Foremost Lithium

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

Diversification Opportunities for NioCorp Developments and Foremost Lithium

0.7

Correlation Coefficient

NioCorp Developments  Foremost Lithium

Poor diversification

The 3 months correlation between NioCorp and Foremost is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding NioCorp Developments Ltd and Foremost Lithium Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foremost Lithium Resource 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 Foremost Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foremost Lithium Resource has no effect on the direction of NioCorp Developments i.e., NioCorp Developments and Foremost Lithium go up and down completely randomly.

Pair Corralation between NioCorp Developments and Foremost Lithium

Allowing for the 90-day total investment horizon NioCorp Developments Ltd is expected to generate 0.85 times more return on investment than Foremost Lithium. However, NioCorp Developments Ltd is 1.17 times less risky than Foremost Lithium. It trades about -0.01 of its potential returns per unit of risk. Foremost Lithium Resource is currently generating about -0.15 per unit of risk. If you would invest  172.00  in NioCorp Developments Ltd on September 13, 2024 and sell it today you would lose (22.00) from holding NioCorp Developments Ltd or give up 12.79% of portfolio value over 90 days.

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

NioCorp Developments Ltd  vs.  Foremost Lithium Resource

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.

Foremost Lithium Resource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foremost Lithium Resource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with NioCorp Developments and Foremost Lithium

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

The idea behind NioCorp Developments Ltd and Foremost Lithium Resource 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.