Correlation Between Altagas and NextSource Materials

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

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

Diversification Opportunities for Altagas and NextSource Materials

-0.51

Correlation Coefficient

Altagas  NextSource Materials

Excellent diversification

The 3 months correlation between Altagas and NextSource is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Altagas Ltd Pref and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials and Altagas 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 Altagas Ltd Pref 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 Altagas i.e., Altagas and NextSource Materials go up and down completely randomly.

Pair Corralation between Altagas and NextSource Materials

Assuming the 90 days trading horizon Altagas Ltd Pref is expected to generate 0.16 times more return on investment than NextSource Materials. However, Altagas Ltd Pref is 6.26 times less risky than NextSource Materials. It trades about 0.13 of its potential returns per unit of risk. NextSource Materials is currently generating about -0.1 per unit of risk. If you would invest  2,234  in Altagas Ltd Pref on September 12, 2024 and sell it today you would earn a total of  102.00  from holding Altagas Ltd Pref or generate 4.57% return on investment over 90 days.

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

Altagas Ltd Pref  vs.  NextSource Materials

Altagas Pref

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Altagas Ltd Pref are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Altagas is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

NextSource Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NextSource Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Altagas and NextSource Materials

The main advantage of trading using opposite Altagas and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altagas 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 Altagas Ltd Pref 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.