Correlation Between NextSource Materials and Prime Mining
Can any of the company-specific risk be diversified away by investing in both NextSource Materials and Prime Mining 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 Prime Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NextSource Materials and Prime Mining Corp, you can compare the effects of market volatilities on NextSource Materials and Prime Mining 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 Prime Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextSource Materials and Prime Mining.
Diversification Opportunities for NextSource Materials and Prime Mining
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NextSource and Prime is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Prime Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Mining Corp 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 Prime Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Mining Corp has no effect on the direction of NextSource Materials i.e., NextSource Materials and Prime Mining go up and down completely randomly.
Pair Corralation between NextSource Materials and Prime Mining
Assuming the 90 days horizon NextSource Materials is expected to under-perform the Prime Mining. But the otc stock apears to be less risky and, when comparing its historical volatility, NextSource Materials is 1.12 times less risky than Prime Mining. The otc stock trades about -0.06 of its potential returns per unit of risk. The Prime Mining Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 134.00 in Prime Mining Corp on September 3, 2024 and sell it today you would lose (27.00) from holding Prime Mining Corp or give up 20.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NextSource Materials vs. Prime Mining Corp
Performance |
| Timeline |
| NextSource Materials |
| Prime Mining Corp |
NextSource Materials and Prime Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NextSource Materials and Prime Mining
The main advantage of trading using opposite NextSource Materials and Prime Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextSource Materials position performs unexpectedly, Prime Mining 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 Prime Mining will offset losses from the drop in Prime Mining'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 |
| Prime Mining vs. Kenorland Minerals | Prime Mining vs. Canstar Resources | Prime Mining vs. Euro Manganese | Prime Mining vs. Chalice Mining Limited |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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