Correlation Between Coty and NioCorp Developments
Can any of the company-specific risk be diversified away by investing in both Coty 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 Coty and NioCorp Developments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coty Inc and NioCorp Developments Ltd, you can compare the effects of market volatilities on Coty 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 Coty with a short position of NioCorp Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and NioCorp Developments.
Diversification Opportunities for Coty and NioCorp Developments
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Coty and NioCorp is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and NioCorp Developments Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NioCorp Developments and Coty 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 Coty Inc 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 Coty i.e., Coty and NioCorp Developments go up and down completely randomly.
Pair Corralation between Coty and NioCorp Developments
Given the investment horizon of 90 days Coty is expected to generate 5.59 times less return on investment than NioCorp Developments. But when comparing it to its historical volatility, Coty Inc is 1.91 times less risky than NioCorp Developments. It trades about 0.11 of its potential returns per unit of risk. NioCorp Developments Ltd is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 141.00 in NioCorp Developments Ltd on October 23, 2024 and sell it today you would earn a total of 27.00 from holding NioCorp Developments Ltd or generate 19.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coty Inc vs. NioCorp Developments Ltd
Performance |
| Timeline |
| Coty Inc |
| NioCorp Developments |
Coty and NioCorp Developments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coty and NioCorp Developments
The main advantage of trading using opposite Coty and NioCorp Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty 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 Coty Inc 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.| NioCorp Developments vs. Sea | NioCorp Developments vs. Tenaris SA ADR | NioCorp Developments vs. Helmerich and Payne | NioCorp Developments vs. Asbury Automotive Group |
Check out your portfolio center.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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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