Correlation Between NextSource Materials and Overactive Media

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

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

Diversification Opportunities for NextSource Materials and Overactive Media

-0.59

Correlation Coefficient

NextSource Materials  Overactive Media

Excellent diversification

The 3 months correlation between NextSource and Overactive is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Overactive Media Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overactive Media 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 Overactive Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overactive Media Corp has no effect on the direction of NextSource Materials i.e., NextSource Materials and Overactive Media go up and down completely randomly.

Pair Corralation between NextSource Materials and Overactive Media

Assuming the 90 days trading horizon NextSource Materials is expected to under-perform the Overactive Media. But the stock apears to be less risky and, when comparing its historical volatility, NextSource Materials is 1.13 times less risky than Overactive Media. The stock trades about -0.05 of its potential returns per unit of risk. The Overactive Media Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Overactive Media Corp on December 3, 2024 and sell it today you would lose (2.00) from holding Overactive Media Corp or give up 6.67% of portfolio value over 90 days.

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

NextSource Materials  vs.  Overactive Media Corp

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.

Overactive Media Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Overactive Media Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Overactive Media may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NextSource Materials and Overactive Media

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

The idea behind NextSource Materials and Overactive Media Corp 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.