Correlation Between NextSource Materials and International Lithium
Can any of the company-specific risk be diversified away by investing in both NextSource Materials and International Lithium 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 International Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NextSource Materials and International Lithium Corp, you can compare the effects of market volatilities on NextSource Materials and International Lithium 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 International Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextSource Materials and International Lithium.
Diversification Opportunities for NextSource Materials and International Lithium
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NextSource and International is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and International Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Lithium 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 International Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Lithium has no effect on the direction of NextSource Materials i.e., NextSource Materials and International Lithium go up and down completely randomly.
Pair Corralation between NextSource Materials and International Lithium
Assuming the 90 days horizon NextSource Materials is expected to generate 1.0 times more return on investment than International Lithium. However, NextSource Materials is 1.0 times more volatile than International Lithium Corp. It trades about 0.03 of its potential returns per unit of risk. International Lithium Corp is currently generating about -0.06 per unit of risk. If you would invest 55.00 in NextSource Materials on November 9, 2024 and sell it today you would earn a total of 0.00 from holding NextSource Materials or generate 0.0% 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. International Lithium Corp
Performance |
| Timeline |
| NextSource Materials |
| International Lithium |
NextSource Materials and International Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NextSource Materials and International Lithium
The main advantage of trading using opposite NextSource Materials and International Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextSource Materials position performs unexpectedly, International Lithium 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 International Lithium will offset losses from the drop in International Lithium's long position.| NextSource Materials vs. Leading Edge Materials | NextSource Materials vs. Syrah Resources Limited | NextSource Materials vs. Mason Graphite | NextSource Materials vs. Graphite One |
| International Lithium vs. Decade Resources | International Lithium vs. Silver Spruce Resources | International Lithium vs. Grid Metals Corp | International Lithium vs. Canada Rare Earth |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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