Correlation Between HP and NextSource Materials
Can any of the company-specific risk be diversified away by investing in both HP 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 HP and NextSource Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and NextSource Materials, you can compare the effects of market volatilities on HP 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 HP with a short position of NextSource Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and NextSource Materials.
Diversification Opportunities for HP and NextSource Materials
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between HP and NextSource is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials and HP 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 HP Inc 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 HP i.e., HP and NextSource Materials go up and down completely randomly.
Pair Corralation between HP and NextSource Materials
Considering the 90-day investment horizon HP Inc is expected to generate 0.44 times more return on investment than NextSource Materials. However, HP Inc is 2.25 times less risky than NextSource Materials. It trades about 0.05 of its potential returns per unit of risk. NextSource Materials is currently generating about -0.06 per unit of risk. If you would invest 2,514 in HP Inc on September 6, 2024 and sell it today you would earn a total of 1,122 from holding HP Inc or generate 44.63% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 99.8% |
Values | Daily Returns |
HP Inc vs. NextSource Materials
Performance |
Timeline |
HP Inc |
NextSource Materials |
HP and NextSource Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HP and NextSource Materials
The main advantage of trading using opposite HP and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP 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 HP Inc 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.NextSource Materials vs. Leading Edge Materials | NextSource Materials vs. Syrah Resources Limited | NextSource Materials vs. Mason Graphite | NextSource Materials vs. Graphite One |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine |