Correlation Between NextSource Materials and US Financial
Can any of the company-specific risk be diversified away by investing in both NextSource Materials and US Financial 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 US Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NextSource Materials and US Financial 15, you can compare the effects of market volatilities on NextSource Materials and US Financial 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 US Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextSource Materials and US Financial.
Diversification Opportunities for NextSource Materials and US Financial
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between NextSource and FTU-PB is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and US Financial 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Financial 15 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 US Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Financial 15 has no effect on the direction of NextSource Materials i.e., NextSource Materials and US Financial go up and down completely randomly.
Pair Corralation between NextSource Materials and US Financial
Assuming the 90 days trading horizon NextSource Materials is expected to under-perform the US Financial. In addition to that, NextSource Materials is 2.55 times more volatile than US Financial 15. It trades about -0.39 of its total potential returns per unit of risk. US Financial 15 is currently generating about 0.03 per unit of volatility. If you would invest 773.00 in US Financial 15 on November 29, 2024 and sell it today you would earn a total of 8.00 from holding US Financial 15 or generate 1.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NextSource Materials vs. US Financial 15
Performance |
| Timeline |
| NextSource Materials |
| US Financial 15 |
NextSource Materials and US Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NextSource Materials and US Financial
The main advantage of trading using opposite NextSource Materials and US Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextSource Materials position performs unexpectedly, US Financial 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 US Financial will offset losses from the drop in US Financial'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 |
| US Financial vs. North American Financial | US Financial vs. Prime Dividend Corp | US Financial vs. Canadian Life Companies | US Financial vs. Financial 15 Split |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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