Correlation Between NextSource Materials and Meta Platforms

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

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

Diversification Opportunities for NextSource Materials and Meta Platforms

-0.01

Correlation Coefficient

NextSource Materials  Meta Platforms

Good diversification

The 3 months correlation between NextSource and Meta is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Meta Platforms CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms CDR has no effect on the direction of NextSource Materials i.e., NextSource Materials and Meta Platforms go up and down completely randomly.

Pair Corralation between NextSource Materials and Meta Platforms

Assuming the 90 days trading horizon NextSource Materials is expected to under-perform the Meta Platforms. In addition to that, NextSource Materials is 3.57 times more volatile than Meta Platforms CDR. It trades about -0.07 of its total potential returns per unit of risk. Meta Platforms CDR is currently generating about 0.07 per unit of volatility. If you would invest  3,402  in Meta Platforms CDR on December 4, 2024 and sell it today you would earn a total of  209.00  from holding Meta Platforms CDR or generate 6.14% 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.  Meta Platforms 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.

Meta Platforms CDR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms CDR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Meta Platforms may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NextSource Materials and Meta Platforms

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

The idea behind NextSource Materials and Meta Platforms 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.