Correlation Between Nuinsco Resources and South Star

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

By analyzing existing cross correlation between Nuinsco Resources Limited and South Star Battery, you can compare the effects of market volatilities on Nuinsco Resources and South Star 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 Nuinsco Resources with a short position of South Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuinsco Resources and South Star.

Diversification Opportunities for Nuinsco Resources and South Star

0.36

Correlation Coefficient

Nuinsco Resources  South Star

Weak diversification

The 3 months correlation between Nuinsco and South is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Nuinsco Resources Limited and South Star Battery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Star Battery and Nuinsco Resources 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 Nuinsco Resources Limited are associated (or correlated) with South Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Star Battery has no effect on the direction of Nuinsco Resources i.e., Nuinsco Resources and South Star go up and down completely randomly.

Pair Corralation between Nuinsco Resources and South Star

Assuming the 90 days horizon Nuinsco Resources Limited is expected to generate 6.55 times more return on investment than South Star. However, Nuinsco Resources is 6.55 times more volatile than South Star Battery. It trades about 0.05 of its potential returns per unit of risk. South Star Battery is currently generating about -0.02 per unit of risk. If you would invest  0.36  in Nuinsco Resources Limited on September 4, 2024 and sell it today you would lose (0.21) from holding Nuinsco Resources Limited or give up 58.33% of portfolio value over 90 days.

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

Nuinsco Resources Limited  vs.  South Star Battery

Nuinsco Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nuinsco Resources Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Nuinsco Resources reported solid returns over the last few months and may actually be approaching a breakup point.

South Star Battery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days South Star Battery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, South Star is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nuinsco Resources and South Star

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

The idea behind Nuinsco Resources Limited and South Star Battery 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.