Correlation Between NextSource Materials and Leading Edge
Can any of the company-specific risk be diversified away by investing in both NextSource Materials and Leading Edge 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 Leading Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NextSource Materials and Leading Edge Materials, you can compare the effects of market volatilities on NextSource Materials and Leading Edge 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 Leading Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextSource Materials and Leading Edge.
Diversification Opportunities for NextSource Materials and Leading Edge
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NextSource and Leading is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials 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 Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of NextSource Materials i.e., NextSource Materials and Leading Edge go up and down completely randomly.
Pair Corralation between NextSource Materials and Leading Edge
Assuming the 90 days trading horizon NextSource Materials is expected to under-perform the Leading Edge. But the stock apears to be less risky and, when comparing its historical volatility, NextSource Materials is 1.41 times less risky than Leading Edge. The stock trades about -0.25 of its potential returns per unit of risk. The Leading Edge Materials is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest 11.00 in Leading Edge Materials on August 28, 2024 and sell it today you would lose (1.50) from holding Leading Edge Materials or give up 13.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NextSource Materials vs. Leading Edge Materials
Performance |
| Timeline |
| NextSource Materials |
| Leading Edge Materials |
NextSource Materials and Leading Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NextSource Materials and Leading Edge
The main advantage of trading using opposite NextSource Materials and Leading Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextSource Materials position performs unexpectedly, Leading Edge 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 Leading Edge will offset losses from the drop in Leading Edge's long position.| NextSource Materials vs. First Majestic Silver | NextSource Materials vs. Ivanhoe Energy | NextSource Materials vs. Orezone Gold Corp | NextSource Materials vs. Faraday Copper Corp |
| Leading Edge vs. First Majestic Silver | Leading Edge vs. Ivanhoe Energy | Leading Edge vs. Orezone Gold Corp | Leading Edge 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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