Correlation Between Prime Mining and NextSource Materials

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

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

Diversification Opportunities for Prime Mining and NextSource Materials

0.46

Correlation Coefficient

Prime Mining  NextSource Materials

Very weak diversification

The 3 months correlation between Prime and NextSource is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Prime Mining Corp and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials and Prime Mining 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 Prime Mining Corp are associated (or correlated) with NextSource Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextSource Materials has no effect on the direction of Prime Mining i.e., Prime Mining and NextSource Materials go up and down completely randomly.

Pair Corralation between Prime Mining and NextSource Materials

Assuming the 90 days horizon Prime Mining is expected to generate 2.19 times less return on investment than NextSource Materials. In addition to that, Prime Mining is 1.26 times more volatile than NextSource Materials. It trades about 0.01 of its total potential returns per unit of risk. NextSource Materials is currently generating about 0.02 per unit of volatility. 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

Prime Mining Corp  vs.  NextSource Materials

Prime Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prime Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Prime Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Prime Mining and NextSource Materials

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

The idea behind Prime Mining Corp and NextSource Materials 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.