Correlation Between NextSource Materials and Plata Latina

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

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

Diversification Opportunities for NextSource Materials and Plata Latina

-0.12

Correlation Coefficient

NextSource Materials  Plata Latina

Good diversification

The 3 months correlation between NextSource and Plata is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Plata Latina Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plata Latina Minerals 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 Plata Latina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plata Latina Minerals has no effect on the direction of NextSource Materials i.e., NextSource Materials and Plata Latina go up and down completely randomly.

Pair Corralation between NextSource Materials and Plata Latina

Assuming the 90 days trading horizon NextSource Materials is expected to under-perform the Plata Latina. But the stock apears to be less risky and, when comparing its historical volatility, NextSource Materials is 4.99 times less risky than Plata Latina. The stock trades about -0.04 of its potential returns per unit of risk. The Plata Latina Minerals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Plata Latina Minerals on September 26, 2024 and sell it today you would earn a total of  0.00  from holding Plata Latina Minerals or generate 0.0% return on investment over 90 days.

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

NextSource Materials  vs.  Plata Latina Minerals

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.

Plata Latina Minerals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plata Latina Minerals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Plata Latina showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NextSource Materials and Plata Latina

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

The idea behind NextSource Materials and Plata Latina Minerals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.