Correlation Between GMS and NioCorp Developments

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Can any of the company-specific risk be diversified away by investing in both GMS 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 GMS and NioCorp Developments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and NioCorp Developments Ltd, you can compare the effects of market volatilities on GMS 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 GMS with a short position of NioCorp Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and NioCorp Developments.

Diversification Opportunities for GMS and NioCorp Developments

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between GMS and NioCorp is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding GMS 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 GMS 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 GMS 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 GMS i.e., GMS and NioCorp Developments go up and down completely randomly.

Pair Corralation between GMS and NioCorp Developments

Considering the 90-day investment horizon GMS Inc is expected to generate 0.47 times more return on investment than NioCorp Developments. However, GMS Inc is 2.11 times less risky than NioCorp Developments. It trades about 0.27 of its potential returns per unit of risk. NioCorp Developments Ltd is currently generating about -0.34 per unit of risk. If you would invest  8,926  in GMS Inc on August 24, 2024 and sell it today you would earn a total of  983.00  from holding GMS Inc or generate 11.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

GMS Inc  vs.  NioCorp Developments Ltd

 Performance 
       Timeline  
GMS Inc 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, GMS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
NioCorp Developments 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days NioCorp Developments Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

GMS and NioCorp Developments Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GMS and NioCorp Developments

The main advantage of trading using opposite GMS and NioCorp Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS 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 GMS 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.
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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