Correlation Between Inventus Mining and NextSource Materials

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

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

Diversification Opportunities for Inventus Mining and NextSource Materials

0.21

Correlation Coefficient

Inventus Mining  NextSource Materials

Modest diversification

The 3 months correlation between Inventus and NextSource is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Inventus Mining Corp and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials and Inventus Mining 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 Inventus Mining Corp 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 Inventus Mining i.e., Inventus Mining and NextSource Materials go up and down completely randomly.

Pair Corralation between Inventus Mining and NextSource Materials

Assuming the 90 days horizon Inventus Mining Corp is expected to generate 1.28 times more return on investment than NextSource Materials. However, Inventus Mining is 1.28 times more volatile than NextSource Materials. It trades about 0.15 of its potential returns per unit of risk. NextSource Materials is currently generating about -0.02 per unit of risk. If you would invest  6.00  in Inventus Mining Corp on December 2, 2024 and sell it today you would earn a total of  4.00  from holding Inventus Mining Corp or generate 66.67% return on investment over 90 days.

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

Inventus Mining Corp  vs.  NextSource Materials

Inventus Mining Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inventus Mining Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Inventus Mining showed solid returns over the last few months and may actually be approaching a breakup point.

NextSource Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days NextSource Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Inventus Mining and NextSource Materials

The main advantage of trading using opposite Inventus Mining and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inventus Mining 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 Inventus Mining Corp 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.