Correlation Between NexGen Energy and Ebro Foods

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

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

Diversification Opportunities for NexGen Energy and Ebro Foods

-0.15

Correlation Coefficient

NexGen Energy  Ebro Foods

Good diversification

The 3 months correlation between NexGen and Ebro is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and Ebro Foods SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods SA 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 Ebro Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebro Foods SA has no effect on the direction of NexGen Energy i.e., NexGen Energy and Ebro Foods go up and down completely randomly.

Pair Corralation between NexGen Energy and Ebro Foods

Assuming the 90 days horizon NexGen Energy is expected to generate 3.85 times more return on investment than Ebro Foods. However, NexGen Energy is 3.85 times more volatile than Ebro Foods SA. It trades about 0.04 of its potential returns per unit of risk. Ebro Foods SA is currently generating about 0.02 per unit of risk. If you would invest  424.00  in NexGen Energy on October 15, 2024 and sell it today you would earn a total of  237.00  from holding NexGen Energy or generate 55.9% return on investment over 90 days.

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

NexGen Energy  vs.  Ebro Foods SA

NexGen Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NexGen Energy is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Ebro Foods SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ebro Foods SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ebro Foods 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 Ebro Foods

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

The idea behind NexGen Energy and Ebro Foods SA 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.