Correlation Between NextSource Materials and Canadian Imperial

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

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

Diversification Opportunities for NextSource Materials and Canadian Imperial

0.41

Correlation Coefficient

NextSource Materials  Canadian Imperial

Very weak diversification

The 3 months correlation between NextSource and Canadian is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Canadian Imperial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Imperial Bank 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 Canadian Imperial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Imperial Bank has no effect on the direction of NextSource Materials i.e., NextSource Materials and Canadian Imperial go up and down completely randomly.

Pair Corralation between NextSource Materials and Canadian Imperial

Assuming the 90 days trading horizon NextSource Materials is expected to generate 16.32 times more return on investment than Canadian Imperial. However, NextSource Materials is 16.32 times more volatile than Canadian Imperial Bank. It trades about 0.15 of its potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.04 per unit of risk. If you would invest  60.00  in NextSource Materials on October 27, 2024 and sell it today you would earn a total of  28.00  from holding NextSource Materials or generate 46.67% return on investment over 90 days.

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

NextSource Materials  vs.  Canadian Imperial Bank

NextSource Materials

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NextSource Materials are ranked lower than 12 (%) 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.

Canadian Imperial Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Canadian Imperial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NextSource Materials and Canadian Imperial

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

The idea behind NextSource Materials and Canadian Imperial Bank 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.