Correlation Between Nexa Resources and Compass Minerals

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

By analyzing existing cross correlation between Nexa Resources SA and Compass Minerals International, you can compare the effects of market volatilities on Nexa Resources and Compass Minerals 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 Nexa Resources with a short position of Compass Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexa Resources and Compass Minerals.

Diversification Opportunities for Nexa Resources and Compass Minerals

-0.12

Correlation Coefficient

Nexa Resources  Compass Minerals

Good diversification

The 3 months correlation between Nexa and Compass is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Nexa Resources SA and Compass Minerals International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Minerals Int and Nexa Resources 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 Nexa Resources SA are associated (or correlated) with Compass Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Minerals Int has no effect on the direction of Nexa Resources i.e., Nexa Resources and Compass Minerals go up and down completely randomly.

Pair Corralation between Nexa Resources and Compass Minerals

Given the investment horizon of 90 days Nexa Resources SA is expected to generate 1.56 times more return on investment than Compass Minerals. However, Nexa Resources is 1.56 times more volatile than Compass Minerals International. It trades about -0.1 of its potential returns per unit of risk. Compass Minerals International is currently generating about -0.19 per unit of risk. If you would invest  759.00  in Nexa Resources SA on December 1, 2024 and sell it today you would lose (222.00) from holding Nexa Resources SA or give up 29.25% of portfolio value over 90 days.

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

Nexa Resources SA  vs.  Compass Minerals International

Nexa Resources SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nexa Resources SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Compass Minerals Int

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compass Minerals International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Nexa Resources and Compass Minerals

The main advantage of trading using opposite Nexa Resources and Compass Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexa Resources position performs unexpectedly, Compass Minerals 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 Compass Minerals will offset losses from the drop in Compass Minerals' long position.

The idea behind Nexa Resources SA and Compass Minerals International 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.