Correlation Between Global X and NexGen Energy

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

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

Diversification Opportunities for Global X and NexGen Energy

0.79

Correlation Coefficient

Global X  NexGen Energy

Poor diversification

The 3 months correlation between Global and NexGen is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Global X Lithium and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy and Global X 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 Global X Lithium 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 Global X i.e., Global X and NexGen Energy go up and down completely randomly.

Pair Corralation between Global X and NexGen Energy

Assuming the 90 days trading horizon Global X Lithium is expected to generate 0.49 times more return on investment than NexGen Energy. However, Global X Lithium is 2.05 times less risky than NexGen Energy. It trades about -0.13 of its potential returns per unit of risk. NexGen Energy is currently generating about -0.18 per unit of risk. If you would invest  1,649  in Global X Lithium on December 1, 2024 and sell it today you would lose (220.00) from holding Global X Lithium or give up 13.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Global X Lithium  vs.  NexGen Energy

Global X Lithium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

NexGen Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days NexGen Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Global X and NexGen Energy

The main advantage of trading using opposite Global X and NexGen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X Lithium 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.