Correlation Between NextSource Materials and Marvel Discovery
Can any of the company-specific risk be diversified away by investing in both NextSource Materials and Marvel Discovery 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 Marvel Discovery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NextSource Materials and Marvel Discovery Corp, you can compare the effects of market volatilities on NextSource Materials and Marvel Discovery 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 Marvel Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextSource Materials and Marvel Discovery.
Diversification Opportunities for NextSource Materials and Marvel Discovery
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NextSource and Marvel is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Marvel Discovery Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marvel Discovery Corp 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 Marvel Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marvel Discovery Corp has no effect on the direction of NextSource Materials i.e., NextSource Materials and Marvel Discovery go up and down completely randomly.
Pair Corralation between NextSource Materials and Marvel Discovery
Assuming the 90 days trading horizon NextSource Materials is expected to generate 0.35 times more return on investment than Marvel Discovery. However, NextSource Materials is 2.88 times less risky than Marvel Discovery. It trades about 0.4 of its potential returns per unit of risk. Marvel Discovery Corp is currently generating about -0.12 per unit of risk. If you would invest 51.00 in NextSource Materials on September 25, 2024 and sell it today you would earn a total of 29.00 from holding NextSource Materials or generate 56.86% 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. Marvel Discovery Corp
Performance |
Timeline |
NextSource Materials |
Marvel Discovery Corp |
NextSource Materials and Marvel Discovery Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NextSource Materials and Marvel Discovery
The main advantage of trading using opposite NextSource Materials and Marvel Discovery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextSource Materials position performs unexpectedly, Marvel Discovery 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 Marvel Discovery will offset losses from the drop in Marvel Discovery's long position.NextSource Materials vs. Leading Edge Materials | NextSource Materials vs. Northern Graphite | NextSource Materials vs. Lomiko Metals | NextSource Materials vs. Elcora Advanced Materials |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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