Correlation Between Intel and NextSource Materials

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

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

Diversification Opportunities for Intel and NextSource Materials

-0.69

Correlation Coefficient

Intel  NextSource Materials

Excellent diversification

The 3 months correlation between Intel and NextSource is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Intel and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials and Intel 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 Intel 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 Intel i.e., Intel and NextSource Materials go up and down completely randomly.

Pair Corralation between Intel and NextSource Materials

Given the investment horizon of 90 days Intel is expected to under-perform the NextSource Materials. But the stock apears to be less risky and, when comparing its historical volatility, Intel is 1.92 times less risky than NextSource Materials. The stock trades about -0.4 of its potential returns per unit of risk. The NextSource Materials is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  42.00  in NextSource Materials on September 9, 2024 and sell it today you would earn a total of  1.00  from holding NextSource Materials or generate 2.38% return on investment over 90 days.

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

Intel  vs.  NextSource Materials

Intel

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Intel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NextSource Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NextSource Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Intel and NextSource Materials

The main advantage of trading using opposite Intel and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel 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 Intel 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.