Correlation Between NextSource Materials and INTEL CDR

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

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

Diversification Opportunities for NextSource Materials and INTEL CDR

-0.53

Correlation Coefficient

NextSource Materials  INTEL CDR

Excellent diversification

The 3 months correlation between NextSource and INTEL is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and INTEL CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTEL CDR 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 INTEL CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTEL CDR has no effect on the direction of NextSource Materials i.e., NextSource Materials and INTEL CDR go up and down completely randomly.

Pair Corralation between NextSource Materials and INTEL CDR

Assuming the 90 days trading horizon NextSource Materials is expected to generate 1.92 times more return on investment than INTEL CDR. However, NextSource Materials is 1.92 times more volatile than INTEL CDR. It trades about -0.02 of its potential returns per unit of risk. INTEL CDR is currently generating about -0.4 per unit of risk. If you would invest  55.00  in NextSource Materials on September 12, 2024 and sell it today you would lose (2.00) from holding NextSource Materials or give up 3.64% of portfolio value over 90 days.

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

NextSource Materials  vs.  INTEL CDR

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.

INTEL CDR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INTEL CDR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, INTEL CDR is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NextSource Materials and INTEL CDR

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

The idea behind NextSource Materials and INTEL CDR 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.