Correlation Between NextSource Materials and Hampton Financial

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

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

Diversification Opportunities for NextSource Materials and Hampton Financial

0.68

Correlation Coefficient

NextSource Materials  Hampton Financial

Poor diversification

The 3 months correlation between NextSource and Hampton is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Hampton Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hampton Financial Corp 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 Hampton Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hampton Financial Corp has no effect on the direction of NextSource Materials i.e., NextSource Materials and Hampton Financial go up and down completely randomly.

Pair Corralation between NextSource Materials and Hampton Financial

Assuming the 90 days trading horizon NextSource Materials is expected to generate 2.25 times less return on investment than Hampton Financial. In addition to that, NextSource Materials is 1.61 times more volatile than Hampton Financial Corp. It trades about 0.0 of its total potential returns per unit of risk. Hampton Financial Corp is currently generating about 0.01 per unit of volatility. If you would invest  45.00  in Hampton Financial Corp on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Hampton Financial Corp or generate 0.0% return on investment over 90 days.

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

NextSource Materials  vs.  Hampton Financial Corp

NextSource Materials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NextSource Materials are ranked lower than 6 (%) 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.

Hampton Financial Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hampton Financial Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hampton Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with NextSource Materials and Hampton Financial

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

The idea behind NextSource Materials and Hampton Financial Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.