Correlation Between Avino Silver and NexGen Energy

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

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

Diversification Opportunities for Avino Silver and NexGen Energy

0.65

Correlation Coefficient

Avino Silver  NexGen Energy

Poor diversification

The 3 months correlation between Avino and NexGen is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Avino Silver Gold and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy and Avino Silver 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 Avino Silver Gold are associated (or correlated) with NexGen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGen Energy has no effect on the direction of Avino Silver i.e., Avino Silver and NexGen Energy go up and down completely randomly.

Pair Corralation between Avino Silver and NexGen Energy

Assuming the 90 days trading horizon Avino Silver is expected to generate 1.9 times less return on investment than NexGen Energy. In addition to that, Avino Silver is 1.36 times more volatile than NexGen Energy. It trades about 0.11 of its total potential returns per unit of risk. NexGen Energy is currently generating about 0.28 per unit of volatility. If you would invest  743.00  in NexGen Energy on September 3, 2024 and sell it today you would earn a total of  448.00  from holding NexGen Energy or generate 60.3% return on investment over 90 days.

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

Avino Silver Gold  vs.  NexGen Energy

Avino Silver Gold

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avino Silver Gold are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Avino Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

NexGen Energy

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, NexGen Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avino Silver and NexGen Energy

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

The idea behind Avino Silver Gold and NexGen Energy 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 Global Correlations module to find global opportunities by holding instruments from different markets.