Correlation Between NextSource Materials and Arizona Gold

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

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

Diversification Opportunities for NextSource Materials and Arizona Gold

0.1

Correlation Coefficient

NextSource Materials  Arizona Gold

Average diversification

The 3 months correlation between NextSource and Arizona is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Arizona Gold Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arizona Gold Silver 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 Arizona Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arizona Gold Silver has no effect on the direction of NextSource Materials i.e., NextSource Materials and Arizona Gold go up and down completely randomly.

Pair Corralation between NextSource Materials and Arizona Gold

Assuming the 90 days trading horizon NextSource Materials is expected to generate 1.62 times less return on investment than Arizona Gold. In addition to that, NextSource Materials is 1.23 times more volatile than Arizona Gold Silver. It trades about 0.1 of its total potential returns per unit of risk. Arizona Gold Silver is currently generating about 0.2 per unit of volatility. If you would invest  34.00  in Arizona Gold Silver on September 26, 2024 and sell it today you would earn a total of  16.00  from holding Arizona Gold Silver or generate 47.06% return on investment over 90 days.

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

NextSource Materials  vs.  Arizona Gold Silver

NextSource Materials

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NextSource Materials are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, NextSource Materials displayed solid returns over the last few months and may actually be approaching a breakup point.

Arizona Gold Silver

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arizona Gold Silver are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Arizona Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NextSource Materials and Arizona Gold

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

The idea behind NextSource Materials and Arizona Gold Silver 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 Transaction History module to view history of all your transactions and understand their impact on performance.