Correlation Between NextSource Materials and Senvest Capital

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

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

Diversification Opportunities for NextSource Materials and Senvest Capital

0.38

Correlation Coefficient

NextSource Materials  Senvest Capital

Weak diversification

The 3 months correlation between NextSource and Senvest is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Senvest Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senvest Capital 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 Senvest Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senvest Capital has no effect on the direction of NextSource Materials i.e., NextSource Materials and Senvest Capital go up and down completely randomly.

Pair Corralation between NextSource Materials and Senvest Capital

Assuming the 90 days trading horizon NextSource Materials is expected to under-perform the Senvest Capital. In addition to that, NextSource Materials is 7.98 times more volatile than Senvest Capital. It trades about -0.38 of its total potential returns per unit of risk. Senvest Capital is currently generating about 0.05 per unit of volatility. If you would invest  38,950  in Senvest Capital on December 2, 2024 and sell it today you would earn a total of  300.00  from holding Senvest Capital or generate 0.77% return on investment over 90 days.

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

NextSource Materials  vs.  Senvest Capital

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 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.

Senvest Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Senvest Capital are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Senvest Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NextSource Materials and Senvest Capital

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

The idea behind NextSource Materials and Senvest Capital 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.