Correlation Between Cariboo Rose and NextSource Materials

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

Diversification Opportunities for Cariboo Rose and NextSource Materials

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Cariboo and NextSource is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Cariboo Rose Resources and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials and Cariboo Rose 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 Cariboo Rose Resources are associated (or correlated) with NextSource Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextSource Materials has no effect on the direction of Cariboo Rose i.e., Cariboo Rose and NextSource Materials go up and down completely randomly.

Pair Corralation between Cariboo Rose and NextSource Materials

Assuming the 90 days horizon Cariboo Rose is expected to generate 1.88 times less return on investment than NextSource Materials. In addition to that, Cariboo Rose is 1.38 times more volatile than NextSource Materials. It trades about 0.03 of its total potential returns per unit of risk. NextSource Materials is currently generating about 0.08 per unit of volatility. If you would invest  55.00  in NextSource Materials on September 12, 2024 and sell it today you would earn a total of  4.00  from holding NextSource Materials or generate 7.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

Cariboo Rose Resources  vs.  NextSource Materials

 Performance 
       Timeline  
Cariboo Rose Resources 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Cariboo Rose Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Cariboo Rose showed solid returns over the last few months and may actually be approaching a breakup point.
NextSource Materials 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days NextSource Materials 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.

Cariboo Rose and NextSource Materials Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cariboo Rose and NextSource Materials

The main advantage of trading using opposite Cariboo Rose and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cariboo Rose position performs unexpectedly, NextSource Materials 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 NextSource Materials will offset losses from the drop in NextSource Materials' long position.
The idea behind Cariboo Rose Resources and NextSource Materials 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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