Correlation Between NioCorp Developments and American Lithium
Can any of the company-specific risk be diversified away by investing in both NioCorp Developments and American Lithium 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 American Lithium 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 American Lithium Corp, you can compare the effects of market volatilities on NioCorp Developments and American Lithium 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 American Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of NioCorp Developments and American Lithium.
Diversification Opportunities for NioCorp Developments and American Lithium
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between NioCorp and American is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding NioCorp Developments Ltd and American Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Lithium Corp 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 American Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Lithium Corp has no effect on the direction of NioCorp Developments i.e., NioCorp Developments and American Lithium go up and down completely randomly.
Pair Corralation between NioCorp Developments and American Lithium
Allowing for the 90-day total investment horizon NioCorp Developments Ltd is expected to under-perform the American Lithium. But the stock apears to be less risky and, when comparing its historical volatility, NioCorp Developments Ltd is 1.12 times less risky than American Lithium. The stock trades about -0.4 of its potential returns per unit of risk. The American Lithium Corp is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 78.00 in American Lithium Corp on August 31, 2024 and sell it today you would lose (9.00) from holding American Lithium Corp or give up 11.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NioCorp Developments Ltd vs. American Lithium Corp
Performance |
| Timeline |
| NioCorp Developments |
| American Lithium Corp |
NioCorp Developments and American Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NioCorp Developments and American Lithium
The main advantage of trading using opposite NioCorp Developments and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NioCorp Developments position performs unexpectedly, American Lithium 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 American Lithium will offset losses from the drop in American Lithium's long position.| NioCorp Developments vs. FTAI Aviation Ltd | NioCorp Developments vs. United Rentals | NioCorp Developments vs. Brunswick | NioCorp Developments vs. Wabash National |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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