Correlation Between NexGen Energy and EPlay Digital

Can any of the company-specific risk be diversified away by investing in both NexGen Energy and EPlay Digital 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 NexGen Energy and EPlay Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NexGen Energy and ePlay Digital, you can compare the effects of market volatilities on NexGen Energy and EPlay Digital 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 NexGen Energy with a short position of EPlay Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of NexGen Energy and EPlay Digital.

Diversification Opportunities for NexGen Energy and EPlay Digital

0.0

Correlation Coefficient

NexGen Energy  EPlay Digital

Pay attention - limited upside

The 3 months correlation between NexGen and EPlay is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and ePlay Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ePlay Digital and NexGen Energy 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 NexGen Energy are associated (or correlated) with EPlay Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ePlay Digital has no effect on the direction of NexGen Energy i.e., NexGen Energy and EPlay Digital go up and down completely randomly.

Pair Corralation between NexGen Energy and EPlay Digital

Assuming the 90 days horizon NexGen Energy is expected to generate 107.32 times less return on investment than EPlay Digital. But when comparing it to its historical volatility, NexGen Energy is 30.17 times less risky than EPlay Digital. It trades about 0.04 of its potential returns per unit of risk. ePlay Digital is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.80  in ePlay Digital on October 4, 2024 and sell it today you would lose (0.70) from holding ePlay Digital or give up 87.5% of portfolio value over 90 days.

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

NexGen Energy  vs.  ePlay Digital

NexGen Energy

Risk-Adjusted Performance

3 of 100

Insignificant

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

ePlay Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ePlay Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, EPlay Digital is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NexGen Energy and EPlay Digital

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

The idea behind NexGen Energy and ePlay Digital 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.