Correlation Between NextSource Materials and Vertex Resource

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

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

Diversification Opportunities for NextSource Materials and Vertex Resource

-0.38

Correlation Coefficient

NextSource Materials  Vertex Resource

Very good diversification

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

Pair Corralation between NextSource Materials and Vertex Resource

Assuming the 90 days trading horizon NextSource Materials is expected to generate 1.93 times more return on investment than Vertex Resource. However, NextSource Materials is 1.93 times more volatile than Vertex Resource Group. It trades about 0.49 of its potential returns per unit of risk. Vertex Resource Group is currently generating about 0.21 per unit of risk. If you would invest  51.00  in NextSource Materials on October 9, 2024 and sell it today you would earn a total of  33.00  from holding NextSource Materials or generate 64.71% return on investment over 90 days.

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

NextSource Materials  vs.  Vertex Resource Group

NextSource Materials

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NextSource Materials are ranked lower than 12 (%) 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.

Vertex Resource Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vertex Resource Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Vertex Resource showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NextSource Materials and Vertex Resource

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

The idea behind NextSource Materials and Vertex Resource 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.