Correlation Between Faraday Copper and NextSource Materials
Can any of the company-specific risk be diversified away by investing in both Faraday Copper 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 Faraday Copper and NextSource Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Faraday Copper Corp and NextSource Materials, you can compare the effects of market volatilities on Faraday Copper 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 Faraday Copper with a short position of NextSource Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faraday Copper and NextSource Materials.
Diversification Opportunities for Faraday Copper and NextSource Materials
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Faraday and NextSource is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Copper Corp and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials and Faraday Copper 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 Faraday Copper Corp 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 Faraday Copper i.e., Faraday Copper and NextSource Materials go up and down completely randomly.
Pair Corralation between Faraday Copper and NextSource Materials
Assuming the 90 days trading horizon Faraday Copper Corp is expected to generate 0.74 times more return on investment than NextSource Materials. However, Faraday Copper Corp is 1.36 times less risky than NextSource Materials. It trades about -0.07 of its potential returns per unit of risk. NextSource Materials is currently generating about -0.25 per unit of risk. If you would invest 90.00 in Faraday Copper Corp on August 28, 2024 and sell it today you would lose (3.00) from holding Faraday Copper Corp or give up 3.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Faraday Copper Corp vs. NextSource Materials
Performance |
| Timeline |
| Faraday Copper Corp |
| NextSource Materials |
Faraday Copper and NextSource Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Faraday Copper and NextSource Materials
The main advantage of trading using opposite Faraday Copper and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faraday Copper 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.| Faraday Copper vs. First Majestic Silver | Faraday Copper vs. Ivanhoe Energy | Faraday Copper vs. Orezone Gold Corp |
| NextSource Materials vs. First Majestic Silver | NextSource Materials vs. Ivanhoe Energy | NextSource Materials vs. Orezone Gold Corp | NextSource Materials vs. Faraday Copper Corp |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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