Correlation Between NioCorp Developments and Reliance Steel

Can any of the company-specific risk be diversified away by investing in both NioCorp Developments and Reliance Steel 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 Reliance Steel 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 Reliance Steel Aluminum, you can compare the effects of market volatilities on NioCorp Developments and Reliance Steel 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 Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of NioCorp Developments and Reliance Steel.

Diversification Opportunities for NioCorp Developments and Reliance Steel

-0.24

Correlation Coefficient

NioCorp Developments  Reliance Steel

Very good diversification

The 3 months correlation between NioCorp and Reliance is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding NioCorp Developments Ltd and Reliance Steel Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Steel Aluminum 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 Reliance Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Steel Aluminum has no effect on the direction of NioCorp Developments i.e., NioCorp Developments and Reliance Steel go up and down completely randomly.

Pair Corralation between NioCorp Developments and Reliance Steel

Allowing for the 90-day total investment horizon NioCorp Developments Ltd is expected to under-perform the Reliance Steel. In addition to that, NioCorp Developments is 3.86 times more volatile than Reliance Steel Aluminum. It trades about -0.11 of its total potential returns per unit of risk. Reliance Steel Aluminum is currently generating about -0.4 per unit of volatility. If you would invest  33,314  in Reliance Steel Aluminum on February 1, 2024 and sell it today you would lose (4,842) from holding Reliance Steel Aluminum or give up 14.53% 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.  Reliance Steel Aluminum

NioCorp Developments

Risk-Adjusted Performance

0 of 100

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 June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Reliance Steel Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Steel Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Reliance Steel is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NioCorp Developments and Reliance Steel

The main advantage of trading using opposite NioCorp Developments and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NioCorp Developments position performs unexpectedly, Reliance Steel 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 Reliance Steel will offset losses from the drop in Reliance Steel's long position.

The idea behind NioCorp Developments Ltd and Reliance Steel Aluminum 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.