Correlation Between ValOre Metals and NexGen Energy

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

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

Diversification Opportunities for ValOre Metals and NexGen Energy

0.35

Correlation Coefficient

ValOre Metals  NexGen Energy

Weak diversification

The 3 months correlation between ValOre and NexGen is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding ValOre Metals Corp and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy and ValOre Metals 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 ValOre Metals Corp 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 ValOre Metals i.e., ValOre Metals and NexGen Energy go up and down completely randomly.

Pair Corralation between ValOre Metals and NexGen Energy

Assuming the 90 days trading horizon ValOre Metals Corp is expected to under-perform the NexGen Energy. In addition to that, ValOre Metals is 2.57 times more volatile than NexGen Energy. It trades about -0.01 of its total potential returns per unit of risk. NexGen Energy is currently generating about 0.0 per unit of volatility. If you would invest  713.00  in NexGen Energy on September 22, 2024 and sell it today you would lose (22.00) from holding NexGen Energy or give up 3.09% of portfolio value over 90 days.

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

ValOre Metals Corp  vs.  NexGen Energy

ValOre Metals Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ValOre Metals Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ValOre Metals reported solid returns over the last few months and may actually be approaching a breakup point.

NexGen Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 6 (%) 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.

Pair Trading with ValOre Metals and NexGen Energy

The main advantage of trading using opposite ValOre Metals and NexGen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ValOre Metals 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 ValOre Metals Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.