Correlation Between AALLN and NioCorp Developments

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Can any of the company-specific risk be diversified away by investing in both AALLN 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 AALLN and NioCorp Developments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AALLN 395 10 SEP 50 and NioCorp Developments Ltd, you can compare the effects of market volatilities on AALLN 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 AALLN with a short position of NioCorp Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of AALLN and NioCorp Developments.

Diversification Opportunities for AALLN and NioCorp Developments

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between AALLN and NioCorp is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding AALLN 395 10 SEP 50 and NioCorp Developments Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NioCorp Developments and AALLN 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 AALLN 395 10 SEP 50 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 AALLN i.e., AALLN and NioCorp Developments go up and down completely randomly.

Pair Corralation between AALLN and NioCorp Developments

Assuming the 90 days trading horizon AALLN 395 10 SEP 50 is expected to generate 0.33 times more return on investment than NioCorp Developments. However, AALLN 395 10 SEP 50 is 3.06 times less risky than NioCorp Developments. It trades about 0.03 of its potential returns per unit of risk. NioCorp Developments Ltd is currently generating about -0.37 per unit of risk. If you would invest  7,725  in AALLN 395 10 SEP 50 on September 1, 2024 and sell it today you would earn a total of  26.00  from holding AALLN 395 10 SEP 50 or generate 0.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy57.14%
ValuesDaily Returns

AALLN 395 10 SEP 50  vs.  NioCorp Developments Ltd

 Performance 
       Timeline  
AALLN 5 10 

Risk-Adjusted Performance

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Weak
Compared to the overall equity markets, risk-adjusted returns on investments in AALLN 395 10 SEP 50 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AALLN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
NioCorp Developments 

Risk-Adjusted Performance

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Weak
 
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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 weak 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.

AALLN and NioCorp Developments Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AALLN and NioCorp Developments

The main advantage of trading using opposite AALLN and NioCorp Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AALLN 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.
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The idea behind AALLN 395 10 SEP 50 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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