Correlation Between NextSource Materials and Atico Mining

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

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

Diversification Opportunities for NextSource Materials and Atico Mining

0.4

Correlation Coefficient

NextSource Materials  Atico Mining

Very weak diversification

The 3 months correlation between NextSource and Atico is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Atico Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atico Mining 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 Atico Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atico Mining has no effect on the direction of NextSource Materials i.e., NextSource Materials and Atico Mining go up and down completely randomly.

Pair Corralation between NextSource Materials and Atico Mining

Assuming the 90 days horizon NextSource Materials is expected to generate 0.78 times more return on investment than Atico Mining. However, NextSource Materials is 1.29 times less risky than Atico Mining. It trades about 0.02 of its potential returns per unit of risk. Atico Mining is currently generating about -0.06 per unit of risk. If you would invest  48.00  in NextSource Materials on September 16, 2024 and sell it today you would earn a total of  0.00  from holding NextSource Materials or generate 0.0% return on investment over 90 days.

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

NextSource Materials  vs.  Atico Mining

NextSource Materials

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NextSource Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, NextSource Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Atico Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atico Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NextSource Materials and Atico Mining

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

The idea behind NextSource Materials and Atico Mining 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.