Correlation Between NextSource Materials and Globex Mining

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

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

Diversification Opportunities for NextSource Materials and Globex Mining

-0.38

Correlation Coefficient

NextSource Materials  Globex Mining

Very good diversification

The 3 months correlation between NextSource and Globex is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Globex Mining Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globex Mining Enterprises 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 Globex Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globex Mining Enterprises has no effect on the direction of NextSource Materials i.e., NextSource Materials and Globex Mining go up and down completely randomly.

Pair Corralation between NextSource Materials and Globex Mining

Assuming the 90 days trading horizon NextSource Materials is expected to generate 17.33 times less return on investment than Globex Mining. In addition to that, NextSource Materials is 1.49 times more volatile than Globex Mining Enterprises. It trades about 0.0 of its total potential returns per unit of risk. Globex Mining Enterprises is currently generating about 0.08 per unit of volatility. If you would invest  96.00  in Globex Mining Enterprises on September 21, 2024 and sell it today you would earn a total of  18.00  from holding Globex Mining Enterprises or generate 18.75% 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.  Globex Mining Enterprises

NextSource Materials

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NextSource Materials are ranked lower than 7 (%) 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.

Globex Mining Enterprises

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Globex Mining Enterprises are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Globex Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NextSource Materials and Globex Mining

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

The idea behind NextSource Materials and Globex Mining Enterprises 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.