Correlation Between Wallbridge Mining and NextSource Materials

Can any of the company-specific risk be diversified away by investing in both Wallbridge 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 Wallbridge 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 Wallbridge Mining and NextSource Materials, you can compare the effects of market volatilities on Wallbridge 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 Wallbridge Mining with a short position of NextSource Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wallbridge Mining and NextSource Materials.

Diversification Opportunities for Wallbridge Mining and NextSource Materials

0.55

Correlation Coefficient

Wallbridge Mining  NextSource Materials

Very weak diversification

The 3 months correlation between Wallbridge and NextSource is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Wallbridge Mining and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials and Wallbridge 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 Wallbridge Mining 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 Wallbridge Mining i.e., Wallbridge Mining and NextSource Materials go up and down completely randomly.

Pair Corralation between Wallbridge Mining and NextSource Materials

Assuming the 90 days horizon Wallbridge Mining is expected to under-perform the NextSource Materials. In addition to that, Wallbridge Mining is 1.53 times more volatile than NextSource Materials. It trades about -0.08 of its total potential returns per unit of risk. NextSource Materials is currently generating about 0.21 per unit of volatility. If you would invest  39.00  in NextSource Materials on September 16, 2024 and sell it today you would earn a total of  9.00  from holding NextSource Materials or generate 23.08% return on investment over 90 days.

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

Wallbridge Mining  vs.  NextSource Materials

Wallbridge Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wallbridge Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Wallbridge Mining is not utilizing all of its potentials. The latest 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 Wallbridge Mining and NextSource Materials

The main advantage of trading using opposite Wallbridge Mining and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wallbridge 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 Wallbridge Mining 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.