Correlation Between NextSource Materials and Group Ten

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

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

Diversification Opportunities for NextSource Materials and Group Ten

-0.33

Correlation Coefficient

NextSource Materials  Group Ten

Very good diversification

The 3 months correlation between NextSource and Group is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Group Ten Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Group Ten Metals 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 Group Ten. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Group Ten Metals has no effect on the direction of NextSource Materials i.e., NextSource Materials and Group Ten go up and down completely randomly.

Pair Corralation between NextSource Materials and Group Ten

Assuming the 90 days horizon NextSource Materials is expected to generate 7.05 times less return on investment than Group Ten. But when comparing it to its historical volatility, NextSource Materials is 1.86 times less risky than Group Ten. It trades about 0.02 of its potential returns per unit of risk. Group Ten Metals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Group Ten Metals on September 16, 2024 and sell it today you would earn a total of  2.00  from holding Group Ten Metals or generate 25.0% 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.  Group Ten Metals

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Group Ten Metals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Group Ten Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Group Ten reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NextSource Materials and Group Ten

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

The idea behind NextSource Materials and Group Ten Metals 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.