Correlation Between International Business and NextSource Materials
Can any of the company-specific risk be diversified away by investing in both International Business 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 International Business and NextSource Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Business Machines and NextSource Materials, you can compare the effects of market volatilities on International Business 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 International Business with a short position of NextSource Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and NextSource Materials.
Diversification Opportunities for International Business and NextSource Materials
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and NextSource is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials and International Business 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 International Business Machines 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 International Business i.e., International Business and NextSource Materials go up and down completely randomly.
Pair Corralation between International Business and NextSource Materials
Considering the 90-day investment horizon International Business Machines is expected to generate 0.38 times more return on investment than NextSource Materials. However, International Business Machines is 2.64 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 -0.09 per unit of risk. If you would invest 20,825 in International Business Machines on September 11, 2024 and sell it today you would earn a total of 2,175 from holding International Business Machines or generate 10.44% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
International Business Machine vs. NextSource Materials
Performance |
Timeline |
International Business |
NextSource Materials |
International Business and NextSource Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with International Business and NextSource Materials
The main advantage of trading using opposite International Business and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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.International Business vs. Aquagold International | International Business vs. Thrivent High Yield | International Business vs. Morningstar Unconstrained Allocation | International Business vs. Via Renewables |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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