Correlation Between CNJ Capital and NextSource Materials

Can any of the company-specific risk be diversified away by investing in both CNJ Capital 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 CNJ Capital and NextSource Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CNJ Capital Investments and NextSource Materials, you can compare the effects of market volatilities on CNJ Capital 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 CNJ Capital with a short position of NextSource Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNJ Capital and NextSource Materials.

Diversification Opportunities for CNJ Capital and NextSource Materials

0.0

Correlation Coefficient

CNJ Capital  NextSource Materials

Pay attention - limited upside

The 3 months correlation between CNJ and NextSource is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CNJ Capital Investments and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials and CNJ Capital 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 CNJ Capital Investments 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 CNJ Capital i.e., CNJ Capital and NextSource Materials go up and down completely randomly.

Pair Corralation between CNJ Capital and NextSource Materials

Assuming the 90 days trading horizon CNJ Capital Investments is expected to generate 0.24 times more return on investment than NextSource Materials. However, CNJ Capital Investments is 4.24 times less risky than NextSource Materials. It trades about 0.11 of its potential returns per unit of risk. NextSource Materials is currently generating about 0.02 per unit of risk. If you would invest  41.00  in CNJ Capital Investments on September 23, 2024 and sell it today you would earn a total of  5.00  from holding CNJ Capital Investments or generate 12.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CNJ Capital Investments  vs.  NextSource Materials

CNJ Capital Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNJ Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CNJ Capital is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

NextSource Materials

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NextSource Materials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, NextSource Materials displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CNJ Capital and NextSource Materials

The main advantage of trading using opposite CNJ Capital and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNJ Capital 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.

The idea behind CNJ Capital Investments and NextSource Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.