Correlation Between NextSource Materials and Grid Metals

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

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

Diversification Opportunities for NextSource Materials and Grid Metals

0.63

Correlation Coefficient

NextSource Materials  Grid Metals

Poor diversification

The 3 months correlation between NextSource and Grid is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials and Grid Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grid Metals 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 Grid Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grid Metals Corp has no effect on the direction of NextSource Materials i.e., NextSource Materials and Grid Metals go up and down completely randomly.

Pair Corralation between NextSource Materials and Grid Metals

Assuming the 90 days horizon NextSource Materials is expected to under-perform the Grid Metals. But the otc stock apears to be less risky and, when comparing its historical volatility, NextSource Materials is 1.24 times less risky than Grid Metals. The otc stock trades about 0.0 of its potential returns per unit of risk. The Grid Metals Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5.50  in Grid Metals Corp on May 1, 2025 and sell it today you would lose (0.50) from holding Grid Metals Corp or give up 9.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.29%
Values	Daily Returns

NextSource Materials  vs.  Grid Metals Corp

NextSource Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NextSource Materials are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, NextSource Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Grid Metals Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grid Metals Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Grid Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NextSource Materials and Grid Metals

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

The idea behind NextSource Materials and Grid Metals 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.