Correlation Between Prime Mining and NextSource Materials
Can any of the company-specific risk be diversified away by investing in both Prime Mining and NextSource Materials 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 Prime Mining and NextSource Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prime Mining Corp and NextSource Materials, you can compare the effects of market volatilities on Prime Mining and NextSource Materials 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 Prime Mining with a short position of NextSource Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Mining and NextSource Materials.
Diversification Opportunities for Prime Mining and NextSource Materials
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Prime and NextSource is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Prime Mining Corp and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials and Prime Mining 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 Prime Mining Corp are associated (or correlated) with NextSource Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextSource Materials has no effect on the direction of Prime Mining i.e., Prime Mining and NextSource Materials go up and down completely randomly.
Pair Corralation between Prime Mining and NextSource Materials
Assuming the 90 days horizon Prime Mining Corp is expected to generate 0.57 times more return on investment than NextSource Materials. However, Prime Mining Corp is 1.75 times less risky than NextSource Materials. It trades about -0.32 of its potential returns per unit of risk. NextSource Materials is currently generating about -0.28 per unit of risk. If you would invest 118.00 in Prime Mining Corp on December 4, 2024 and sell it today you would lose (28.00) from holding Prime Mining Corp or give up 23.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prime Mining Corp vs. NextSource Materials
Performance |
| Timeline |
| Prime Mining Corp |
| NextSource Materials |
Prime Mining and NextSource Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prime Mining and NextSource Materials
The main advantage of trading using opposite Prime Mining and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Mining position performs unexpectedly, NextSource Materials 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 NextSource Materials will offset losses from the drop in NextSource Materials' long position.| Prime Mining vs. Kenorland Minerals | ||
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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