Correlation Between NexGen Energy and SAN MIGUEL

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

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

Diversification Opportunities for NexGen Energy and SAN MIGUEL

0.06

Correlation Coefficient

NexGen Energy  SAN MIGUEL

Significant diversification

The 3 months correlation between NexGen and SAN is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and SAN MIGUEL BREWERY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAN MIGUEL BREWERY 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 SAN MIGUEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAN MIGUEL BREWERY has no effect on the direction of NexGen Energy i.e., NexGen Energy and SAN MIGUEL go up and down completely randomly.

Pair Corralation between NexGen Energy and SAN MIGUEL

Assuming the 90 days horizon NexGen Energy is expected to under-perform the SAN MIGUEL. In addition to that, NexGen Energy is 2.42 times more volatile than SAN MIGUEL BREWERY. It trades about -0.03 of its total potential returns per unit of risk. SAN MIGUEL BREWERY is currently generating about -0.04 per unit of volatility. If you would invest  10.00  in SAN MIGUEL BREWERY on October 22, 2024 and sell it today you would lose (0.10) from holding SAN MIGUEL BREWERY or give up 1.0% of portfolio value over 90 days.

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

NexGen Energy  vs.  SAN MIGUEL BREWERY

NexGen Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NexGen Energy has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

SAN MIGUEL BREWERY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAN MIGUEL BREWERY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SAN MIGUEL is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NexGen Energy and SAN MIGUEL

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

The idea behind NexGen Energy and SAN MIGUEL BREWERY 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.