Correlation Between NextSource Materials and Salesforce

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

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

Diversification Opportunities for NextSource Materials and Salesforce

0.14

Correlation Coefficient

NextSource Materials  Salesforce

Average diversification

The 3 months correlation between NextSource and Salesforce is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and SalesforceCom CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SalesforceCom CDR 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 Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SalesforceCom CDR has no effect on the direction of NextSource Materials i.e., NextSource Materials and Salesforce go up and down completely randomly.

Pair Corralation between NextSource Materials and Salesforce

Assuming the 90 days trading horizon NextSource Materials is expected to under-perform the Salesforce. In addition to that, NextSource Materials is 2.74 times more volatile than SalesforceCom CDR. It trades about -0.05 of its total potential returns per unit of risk. SalesforceCom CDR is currently generating about -0.08 per unit of volatility. If you would invest  2,638  in SalesforceCom CDR on December 3, 2024 and sell it today you would lose (320.00) from holding SalesforceCom CDR or give up 12.13% of portfolio value over 90 days.

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

NextSource Materials  vs.  SalesforceCom CDR

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 abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

SalesforceCom CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days SalesforceCom CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating 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 NextSource Materials and Salesforce

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

The idea behind NextSource Materials and SalesforceCom CDR 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 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.