Correlation Between NextSource Materials and Cobalt Power

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

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

Diversification Opportunities for NextSource Materials and Cobalt Power

0.07

Correlation Coefficient

NextSource Materials  Cobalt Power

Significant diversification

The 3 months correlation between NextSource and Cobalt is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Cobalt Power Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cobalt Power Group 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 Cobalt Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cobalt Power Group has no effect on the direction of NextSource Materials i.e., NextSource Materials and Cobalt Power go up and down completely randomly.

Pair Corralation between NextSource Materials and Cobalt Power

Assuming the 90 days trading horizon NextSource Materials is expected to under-perform the Cobalt Power. In addition to that, NextSource Materials is 1.16 times more volatile than Cobalt Power Group. It trades about -0.18 of its total potential returns per unit of risk. Cobalt Power Group is currently generating about 0.02 per unit of volatility. If you would invest  2.50  in Cobalt Power Group on December 24, 2024 and sell it today you would earn a total of  0.00  from holding Cobalt Power Group or generate 0.0% return on investment over 90 days.

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

NextSource Materials  vs.  Cobalt Power Group

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.

Cobalt Power Group

Risk-Adjusted Performance

Weak

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

Pair Trading with NextSource Materials and Cobalt Power

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

The idea behind NextSource Materials and Cobalt Power Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.