Correlation Between NextSource Materials and Pfizer

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

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

Diversification Opportunities for NextSource Materials and Pfizer

0.3

Correlation Coefficient

NextSource Materials  Pfizer

Weak diversification

The 3 months correlation between NextSource and Pfizer is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Pfizer Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc 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 Pfizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfizer Inc CDR has no effect on the direction of NextSource Materials i.e., NextSource Materials and Pfizer go up and down completely randomly.

Pair Corralation between NextSource Materials and Pfizer

Assuming the 90 days trading horizon NextSource Materials is expected to under-perform the Pfizer. In addition to that, NextSource Materials is 2.66 times more volatile than Pfizer Inc CDR. It trades about 0.0 of its total potential returns per unit of risk. Pfizer Inc CDR is currently generating about -0.01 per unit of volatility. If you would invest  1,271  in Pfizer Inc CDR on September 26, 2024 and sell it today you would lose (31.00) from holding Pfizer Inc CDR or give up 2.44% of portfolio value over 90 days.

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

NextSource Materials  vs.  Pfizer Inc CDR

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.

Pfizer Inc CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pfizer Inc CDR 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with NextSource Materials and Pfizer

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

The idea behind NextSource Materials and Pfizer Inc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.