Correlation Between NexGen Energy and Transport International

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

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

Diversification Opportunities for NexGen Energy and Transport International

-0.2

Correlation Coefficient

NexGen Energy  Transport International

Good diversification

The 3 months correlation between NexGen and Transport is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and Transport International Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transport International 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 Transport International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transport International has no effect on the direction of NexGen Energy i.e., NexGen Energy and Transport International go up and down completely randomly.

Pair Corralation between NexGen Energy and Transport International

Assuming the 90 days horizon NexGen Energy is expected to under-perform the Transport International. In addition to that, NexGen Energy is 2.49 times more volatile than Transport International Holdings. It trades about -0.29 of its total potential returns per unit of risk. Transport International Holdings is currently generating about 0.05 per unit of volatility. If you would invest  95.00  in Transport International Holdings on October 4, 2024 and sell it today you would earn a total of  1.00  from holding Transport International Holdings or generate 1.05% 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.  Transport International Holdin

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.

Transport International

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind NexGen Energy and Transport International Holdings 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.