Correlation Between NioCorp Developments and Hannan Metals

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

Diversification Opportunities for NioCorp Developments and Hannan Metals

0.62

Correlation Coefficient

NioCorp Developments  Hannan Metals

Poor diversification

The 3 months correlation between NioCorp and Hannan is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding NioCorp Developments Ltd and Hannan Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannan Metals 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 Hannan Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannan Metals has no effect on the direction of NioCorp Developments i.e., NioCorp Developments and Hannan Metals go up and down completely randomly.

Pair Corralation between NioCorp Developments and Hannan Metals

Allowing for the 90-day total investment horizon NioCorp Developments is expected to generate 1.53 times less return on investment than Hannan Metals. But when comparing it to its historical volatility, NioCorp Developments Ltd is 1.12 times less risky than Hannan Metals. It trades about 0.12 of its potential returns per unit of risk. Hannan Metals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  49.00  in Hannan Metals on December 28, 2024 and sell it today you would earn a total of  36.00  from holding Hannan Metals or generate 73.47% return on investment over 90 days.

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

NioCorp Developments Ltd  vs.  Hannan Metals

NioCorp Developments

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NioCorp Developments Ltd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, NioCorp Developments sustained solid returns over the last few months and may actually be approaching a breakup point.

Hannan Metals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hannan Metals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hannan Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NioCorp Developments and Hannan Metals

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

The idea behind NioCorp Developments Ltd and Hannan Metals 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.