Correlation Between Niocorp Developments and Imagine Lithium

Can any of the company-specific risk be diversified away by investing in both Niocorp Developments and Imagine 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 Imagine Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Niocorp Developments and Imagine Lithium, you can compare the effects of market volatilities on Niocorp Developments and Imagine 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 Imagine Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Niocorp Developments and Imagine Lithium.

Diversification Opportunities for Niocorp Developments and Imagine Lithium

0.39

Correlation Coefficient

Niocorp Developments  Imagine Lithium

Weak diversification

The 3 months correlation between Niocorp and Imagine is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Niocorp Developments and Imagine Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imagine Lithium 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 are associated (or correlated) with Imagine Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imagine Lithium has no effect on the direction of Niocorp Developments i.e., Niocorp Developments and Imagine Lithium go up and down completely randomly.

Pair Corralation between Niocorp Developments and Imagine Lithium

Assuming the 90 days horizon Niocorp Developments is expected to under-perform the Imagine Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Niocorp Developments is 1.96 times less risky than Imagine Lithium. The stock trades about -0.07 of its potential returns per unit of risk. The Imagine Lithium is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Imagine Lithium on January 19, 2024 and sell it today you would lose (6.50) from holding Imagine Lithium or give up 65.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Niocorp Developments  vs.  Imagine Lithium

Niocorp Developments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Niocorp Developments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Imagine Lithium

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Imagine Lithium are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Imagine Lithium showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Niocorp Developments and Imagine Lithium

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

The idea behind Niocorp Developments and Imagine Lithium 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.