Correlation Between Dividend and NextSource Materials

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

By analyzing existing cross correlation between Dividend 15 Split and NextSource Materials, you can compare the effects of market volatilities on Dividend 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 Dividend with a short position of NextSource Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dividend and NextSource Materials.

Diversification Opportunities for Dividend and NextSource Materials

-0.57

Correlation Coefficient

Dividend  NextSource Materials

Excellent diversification

The 3 months correlation between Dividend and NextSource is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dividend 15 Split and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials and Dividend 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 Dividend 15 Split 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 Dividend i.e., Dividend and NextSource Materials go up and down completely randomly.

Pair Corralation between Dividend and NextSource Materials

Assuming the 90 days trading horizon Dividend 15 Split is expected to generate 0.31 times more return on investment than NextSource Materials. However, Dividend 15 Split is 3.2 times less risky than NextSource Materials. It trades about 0.13 of its potential returns per unit of risk. NextSource Materials is currently generating about 0.04 per unit of risk. If you would invest  471.00  in Dividend 15 Split on September 24, 2024 and sell it today you would earn a total of  140.00  from holding Dividend 15 Split or generate 29.72% return on investment over 90 days.

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

Dividend 15 Split  vs.  NextSource Materials

Dividend 15 Split

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dividend 15 Split are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dividend may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Dividend and NextSource Materials

The main advantage of trading using opposite Dividend and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dividend 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 Dividend 15 Split 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.