Correlation Between NexGen Energy and URANIUM ROYALTY

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

By analyzing existing cross correlation between NexGen Energy and URANIUM ROYALTY P, you can compare the effects of market volatilities on NexGen Energy and URANIUM ROYALTY 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 URANIUM ROYALTY. Check out your portfolio center. Please also check ongoing floating volatility patterns of NexGen Energy and URANIUM ROYALTY.

Diversification Opportunities for NexGen Energy and URANIUM ROYALTY

0.3

Correlation Coefficient

NexGen Energy  URANIUM ROYALTY

Weak diversification

The 3 months correlation between NexGen and URANIUM is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and URANIUM ROYALTY P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on URANIUM ROYALTY P 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 URANIUM ROYALTY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of URANIUM ROYALTY P has no effect on the direction of NexGen Energy i.e., NexGen Energy and URANIUM ROYALTY go up and down completely randomly.

Pair Corralation between NexGen Energy and URANIUM ROYALTY

Assuming the 90 days horizon NexGen Energy is expected to generate 0.99 times more return on investment than URANIUM ROYALTY. However, NexGen Energy is 1.01 times less risky than URANIUM ROYALTY. It trades about 0.0 of its potential returns per unit of risk. URANIUM ROYALTY P is currently generating about -0.16 per unit of risk. If you would invest  713.00  in NexGen Energy on September 22, 2024 and sell it today you would lose (22.00) from holding NexGen Energy or give up 3.09% of portfolio value over 90 days.

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

NexGen Energy  vs.  URANIUM ROYALTY P

NexGen Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 6 (%) 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.

URANIUM ROYALTY P

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NexGen Energy and URANIUM ROYALTY

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

The idea behind NexGen Energy and URANIUM ROYALTY P 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.