Correlation Between Nova Minerals and NioCorp Developments

Can any of the company-specific risk be diversified away by investing in both Nova Minerals and NioCorp Developments 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 Nova Minerals and NioCorp Developments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nova Minerals Limited and NioCorp Developments Ltd, you can compare the effects of market volatilities on Nova Minerals and NioCorp Developments 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 Nova Minerals with a short position of NioCorp Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Minerals and NioCorp Developments.

Diversification Opportunities for Nova Minerals and NioCorp Developments

-0.34

Correlation Coefficient

Nova Minerals  NioCorp Developments

Very good diversification

The 3 months correlation between Nova and NioCorp is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Nova Minerals Limited and NioCorp Developments Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NioCorp Developments and Nova Minerals 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 Nova Minerals Limited are associated (or correlated) with NioCorp Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NioCorp Developments has no effect on the direction of Nova Minerals i.e., Nova Minerals and NioCorp Developments go up and down completely randomly.

Pair Corralation between Nova Minerals and NioCorp Developments

Considering the 90-day investment horizon Nova Minerals is expected to generate 5.99 times less return on investment than NioCorp Developments. In addition to that, Nova Minerals is 1.13 times more volatile than NioCorp Developments Ltd. It trades about 0.02 of its total potential returns per unit of risk. NioCorp Developments Ltd is currently generating about 0.11 per unit of volatility. If you would invest  147.00  in NioCorp Developments Ltd on December 24, 2024 and sell it today you would earn a total of  47.00  from holding NioCorp Developments Ltd or generate 31.97% return on investment over 90 days.

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

Nova Minerals Limited  vs.  NioCorp Developments Ltd

Nova Minerals Limited

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Minerals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nova Minerals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 8 (%) 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.

Pair Trading with Nova Minerals and NioCorp Developments

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

The idea behind Nova Minerals Limited and NioCorp Developments Ltd 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.