Correlation Between NioCorp Developments and China Coal
Can any of the company-specific risk be diversified away by investing in both NioCorp Developments and China Coal 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 China Coal 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 China Coal Energy, you can compare the effects of market volatilities on NioCorp Developments and China Coal 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 China Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of NioCorp Developments and China Coal.
Diversification Opportunities for NioCorp Developments and China Coal
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NioCorp and China is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding NioCorp Developments Ltd and China Coal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Coal Energy 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 China Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Coal Energy has no effect on the direction of NioCorp Developments i.e., NioCorp Developments and China Coal go up and down completely randomly.
Pair Corralation between NioCorp Developments and China Coal
Allowing for the 90-day total investment horizon NioCorp Developments Ltd is expected to under-perform the China Coal. But the stock apears to be less risky and, when comparing its historical volatility, NioCorp Developments Ltd is 1.02 times less risky than China Coal. The stock trades about -0.06 of its potential returns per unit of risk. The China Coal Energy is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,503 in China Coal Energy on September 3, 2024 and sell it today you would lose (143.00) from holding China Coal Energy or give up 5.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NioCorp Developments Ltd vs. China Coal Energy
Performance |
| Timeline |
| NioCorp Developments |
| China Coal Energy |
NioCorp Developments and China Coal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NioCorp Developments and China Coal
The main advantage of trading using opposite NioCorp Developments and China Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NioCorp Developments position performs unexpectedly, China Coal 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 China Coal will offset losses from the drop in China Coal's long position.| NioCorp Developments vs. Summit Materials | NioCorp Developments vs. Westrock Coffee | NioCorp Developments vs. Aldel Financial II | NioCorp Developments vs. Keurig Dr Pepper |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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