Correlation Between NextSource Materials and Sun Life
Can any of the company-specific risk be diversified away by investing in both NextSource Materials and Sun Life 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 Sun Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NextSource Materials and Sun Life Financial, you can compare the effects of market volatilities on NextSource Materials and Sun Life 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 Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextSource Materials and Sun Life.
Diversification Opportunities for NextSource Materials and Sun Life
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NextSource and Sun is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Sun Life Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life Financial 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 Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Financial has no effect on the direction of NextSource Materials i.e., NextSource Materials and Sun Life go up and down completely randomly.
Pair Corralation between NextSource Materials and Sun Life
Assuming the 90 days trading horizon NextSource Materials is expected to generate 7.4 times more return on investment than Sun Life. However, NextSource Materials is 7.4 times more volatile than Sun Life Financial. It trades about 0.18 of its potential returns per unit of risk. Sun Life Financial is currently generating about 0.05 per unit of risk. If you would invest 55.00 in NextSource Materials on September 15, 2024 and sell it today you would earn a total of 11.00 from holding NextSource Materials or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NextSource Materials vs. Sun Life Financial
Performance |
| Timeline |
| NextSource Materials |
| Sun Life Financial |
NextSource Materials and Sun Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NextSource Materials and Sun Life
The main advantage of trading using opposite NextSource Materials and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextSource Materials position performs unexpectedly, Sun Life 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 Sun Life will offset losses from the drop in Sun Life's long position.| NextSource Materials vs. Foraco International SA | NextSource Materials vs. Geodrill Limited | NextSource Materials vs. Major Drilling Group | NextSource Materials vs. Bri Chem Corp |
| Sun Life vs. Everyday People Financial | Sun Life vs. Getty Copper | Sun Life vs. NextSource Materials | Sun Life vs. Electra Battery Materials |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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