Correlation Between NextSource Materials and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both NextSource Materials and Algonquin Power 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 NextSource Materials and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NextSource Materials and Algonquin Power Utilities, you can compare the effects of market volatilities on NextSource Materials and Algonquin Power 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 NextSource Materials with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextSource Materials and Algonquin Power.
Diversification Opportunities for NextSource Materials and Algonquin Power
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NextSource and Algonquin is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities and NextSource Materials 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 NextSource Materials are associated (or correlated) with Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of NextSource Materials i.e., NextSource Materials and Algonquin Power go up and down completely randomly.
Pair Corralation between NextSource Materials and Algonquin Power
Assuming the 90 days trading horizon NextSource Materials is expected to under-perform the Algonquin Power. In addition to that, NextSource Materials is 13.79 times more volatile than Algonquin Power Utilities. It trades about -0.36 of its total potential returns per unit of risk. Algonquin Power Utilities is currently generating about -0.17 per unit of volatility. If you would invest 2,472 in Algonquin Power Utilities on November 28, 2024 and sell it today you would lose (42.00) from holding Algonquin Power Utilities or give up 1.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NextSource Materials vs. Algonquin Power Utilities
Performance |
| Timeline |
| NextSource Materials |
| Algonquin Power Utilities |
NextSource Materials and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NextSource Materials and Algonquin Power
The main advantage of trading using opposite NextSource Materials and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextSource Materials position performs unexpectedly, Algonquin Power 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 Algonquin Power will offset losses from the drop in Algonquin Power's long position.| NextSource Materials vs. Leading Edge Materials | NextSource Materials vs. Northern Graphite | NextSource Materials vs. Lomiko Metals | NextSource Materials vs. Elcora Advanced Materials |
| Algonquin Power vs. Titan Mining Corp | Algonquin Power vs. Titanium Transportation Group | Algonquin Power vs. East Side Games | Algonquin Power vs. Nicola Mining |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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