Correlation Between NioCorp Developments and Anglo American

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

Diversification Opportunities for NioCorp Developments and Anglo American

0.21

Correlation Coefficient

NioCorp Developments  Anglo American

Modest diversification

The 3 months correlation between NioCorp and Anglo is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding NioCorp Developments Ltd and Anglo American PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo American PLC 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 Anglo American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglo American PLC has no effect on the direction of NioCorp Developments i.e., NioCorp Developments and Anglo American go up and down completely randomly.

Pair Corralation between NioCorp Developments and Anglo American

Allowing for the 90-day total investment horizon NioCorp Developments Ltd is expected to generate 2.76 times more return on investment than Anglo American. However, NioCorp Developments is 2.76 times more volatile than Anglo American PLC. It trades about 0.12 of its potential returns per unit of risk. Anglo American PLC is currently generating about 0.03 per unit of risk. If you would invest  148.00  in NioCorp Developments Ltd on December 28, 2024 and sell it today you would earn a total of  58.00  from holding NioCorp Developments Ltd or generate 39.19% return on investment over 90 days.

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

NioCorp Developments Ltd  vs.  Anglo American PLC

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.

Anglo American PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Anglo American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NioCorp Developments and Anglo American

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

The idea behind NioCorp Developments Ltd and Anglo American PLC 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.