Correlation Between Blue Sky and NexGen Energy

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

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

Diversification Opportunities for Blue Sky and NexGen Energy

0.43

Correlation Coefficient

Blue Sky  NexGen Energy

Very weak diversification

The 3 months correlation between Blue and NexGen is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Blue Sky Uranium and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy and Blue Sky 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 Blue Sky Uranium 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 Blue Sky i.e., Blue Sky and NexGen Energy go up and down completely randomly.

Pair Corralation between Blue Sky and NexGen Energy

Assuming the 90 days horizon Blue Sky Uranium is expected to generate 2.79 times more return on investment than NexGen Energy. However, Blue Sky is 2.79 times more volatile than NexGen Energy. It trades about 0.12 of its potential returns per unit of risk. NexGen Energy is currently generating about 0.24 per unit of risk. If you would invest  4.00  in Blue Sky Uranium on September 13, 2024 and sell it today you would earn a total of  2.00  from holding Blue Sky Uranium or generate 50.0% return on investment over 90 days.

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

Blue Sky Uranium  vs.  NexGen Energy

Blue Sky Uranium

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Sky Uranium are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Blue Sky showed solid returns over the last few months and may actually be approaching a breakup point.

NexGen Energy

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal 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 Blue Sky and NexGen Energy

The main advantage of trading using opposite Blue Sky and NexGen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Sky 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 Blue Sky Uranium 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.