Correlation Between Conquest Resources and NextSource Materials

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

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

Diversification Opportunities for Conquest Resources and NextSource Materials

0.32

Correlation Coefficient

Conquest Resources  NextSource Materials

Weak diversification

The 3 months correlation between Conquest and NextSource is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Conquest Resources and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials and Conquest Resources 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 Conquest Resources 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 Conquest Resources i.e., Conquest Resources and NextSource Materials go up and down completely randomly.

Pair Corralation between Conquest Resources and NextSource Materials

Assuming the 90 days horizon Conquest Resources is expected to under-perform the NextSource Materials. In addition to that, Conquest Resources is 2.92 times more volatile than NextSource Materials. It trades about -0.03 of its total potential returns per unit of risk. NextSource Materials is currently generating about 0.09 per unit of volatility. If you would invest  64.00  in NextSource Materials on September 21, 2024 and sell it today you would earn a total of  13.00  from holding NextSource Materials or generate 20.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Conquest Resources  vs.  NextSource Materials

Conquest Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Conquest Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

NextSource Materials

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NextSource Materials are ranked lower than 7 (%) 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 Conquest Resources and NextSource Materials

The main advantage of trading using opposite Conquest Resources and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Conquest Resources 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 Conquest Resources 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.