Correlation Between NextSource Materials and Homerun Resources

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

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

Diversification Opportunities for NextSource Materials and Homerun Resources

-0.82

Correlation Coefficient

NextSource Materials  Homerun Resources

Pay attention - limited upside

The 3 months correlation between NextSource and Homerun is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Homerun Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homerun Resources 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 Homerun Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homerun Resources has no effect on the direction of NextSource Materials i.e., NextSource Materials and Homerun Resources go up and down completely randomly.

Pair Corralation between NextSource Materials and Homerun Resources

Assuming the 90 days trading horizon NextSource Materials is expected to generate 0.98 times more return on investment than Homerun Resources. However, NextSource Materials is 1.02 times less risky than Homerun Resources. It trades about 0.15 of its potential returns per unit of risk. Homerun Resources is currently generating about -0.02 per unit of risk. If you would invest  61.00  in NextSource Materials on October 25, 2024 and sell it today you would earn a total of  27.00  from holding NextSource Materials or generate 44.26% return on investment over 90 days.

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

NextSource Materials  vs.  Homerun Resources

NextSource Materials

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NextSource Materials are ranked lower than 11 (%) 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.

Homerun Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Homerun Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with NextSource Materials and Homerun Resources

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

The idea behind NextSource Materials and Homerun Resources 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.