Correlation Between NextSource Materials and Radius Gold

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

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

Diversification Opportunities for NextSource Materials and Radius Gold

0.51

Correlation Coefficient

NextSource Materials  Radius Gold

Very weak diversification

The 3 months correlation between NextSource and Radius is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Radius Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radius Gold 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 Radius Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radius Gold has no effect on the direction of NextSource Materials i.e., NextSource Materials and Radius Gold go up and down completely randomly.

Pair Corralation between NextSource Materials and Radius Gold

Assuming the 90 days trading horizon NextSource Materials is expected to generate 0.53 times more return on investment than Radius Gold. However, NextSource Materials is 1.88 times less risky than Radius Gold. It trades about 0.01 of its potential returns per unit of risk. Radius Gold is currently generating about -0.04 per unit of risk. If you would invest  65.00  in NextSource Materials on September 14, 2024 and sell it today you would lose (2.00) from holding NextSource Materials or give up 3.08% of portfolio value over 90 days.

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

NextSource Materials  vs.  Radius Gold

NextSource Materials

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, NextSource Materials is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Radius Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Radius Gold 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 fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with NextSource Materials and Radius Gold

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

The idea behind NextSource Materials and Radius Gold 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 Transaction History module to view history of all your transactions and understand their impact on performance.