Correlation Between NextSource Materials and Calian Technologies

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

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

Diversification Opportunities for NextSource Materials and Calian Technologies

-0.36

Correlation Coefficient

NextSource Materials  Calian Technologies

Very good diversification

The 3 months correlation between NextSource and Calian is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Calian Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calian Technologies and NextSource Materials 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 NextSource Materials are associated (or correlated) with Calian Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calian Technologies has no effect on the direction of NextSource Materials i.e., NextSource Materials and Calian Technologies go up and down completely randomly.

Pair Corralation between NextSource Materials and Calian Technologies

Assuming the 90 days trading horizon NextSource Materials is expected to generate 2.64 times more return on investment than Calian Technologies. However, NextSource Materials is 2.64 times more volatile than Calian Technologies. It trades about 0.11 of its potential returns per unit of risk. Calian Technologies is currently generating about -0.02 per unit of risk. If you would invest  64.00  in NextSource Materials on September 23, 2024 and sell it today you would earn a total of  18.00  from holding NextSource Materials or generate 28.13% return on investment over 90 days.

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

NextSource Materials  vs.  Calian Technologies

NextSource Materials

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NextSource Materials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, NextSource Materials displayed solid returns over the last few months and may actually be approaching a breakup point.

Calian Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calian Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Calian Technologies is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NextSource Materials and Calian Technologies

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

The idea behind NextSource Materials and Calian Technologies 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.