Correlation Between NioCorp Developments and Cardinal Health

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

Diversification Opportunities for NioCorp Developments and Cardinal Health

-0.32

Correlation Coefficient

NioCorp Developments  Cardinal Health

Very good diversification

The 3 months correlation between NioCorp and Cardinal is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding NioCorp Developments Ltd and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health 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 Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of NioCorp Developments i.e., NioCorp Developments and Cardinal Health go up and down completely randomly.

Pair Corralation between NioCorp Developments and Cardinal Health

Assuming the 90 days horizon NioCorp Developments Ltd is expected to generate 17.13 times more return on investment than Cardinal Health. However, NioCorp Developments is 17.13 times more volatile than Cardinal Health. It trades about 0.05 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.51 per unit of risk. If you would invest  10.00  in NioCorp Developments Ltd on October 25, 2024 and sell it today you would lose (0.65) from holding NioCorp Developments Ltd or give up 6.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

NioCorp Developments Ltd  vs.  Cardinal Health

NioCorp Developments

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NioCorp Developments Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental drivers, NioCorp Developments showed solid returns over the last few months and may actually be approaching a breakup point.

Cardinal Health

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with NioCorp Developments and Cardinal Health

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

The idea behind NioCorp Developments Ltd and Cardinal Health 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.