Correlation Between MRC Global and NXT Energy
Can any of the company-specific risk be diversified away by investing in both MRC Global and NXT 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 MRC Global and NXT Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MRC Global and NXT Energy Solutions, you can compare the effects of market volatilities on MRC Global and NXT 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 MRC Global with a short position of NXT Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of MRC Global and NXT Energy.
Diversification Opportunities for MRC Global and NXT Energy
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MRC and NXT is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding MRC Global and NXT Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXT Energy Solutions and MRC Global 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 MRC Global are associated (or correlated) with NXT Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXT Energy Solutions has no effect on the direction of MRC Global i.e., MRC Global and NXT Energy go up and down completely randomly.
Pair Corralation between MRC Global and NXT Energy
Considering the 90-day investment horizon MRC Global is expected to under-perform the NXT Energy. But the stock apears to be less risky and, when comparing its historical volatility, MRC Global is 4.06 times less risky than NXT Energy. The stock trades about -0.03 of its potential returns per unit of risk. The NXT Energy Solutions is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 12.00 in NXT Energy Solutions on December 26, 2024 and sell it today you would earn a total of 7.00 from holding NXT Energy Solutions or generate 58.33% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
MRC Global vs. NXT Energy Solutions
Performance |
Timeline |
MRC Global |
NXT Energy Solutions |
MRC Global and NXT Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MRC Global and NXT Energy
The main advantage of trading using opposite MRC Global and NXT Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MRC Global position performs unexpectedly, NXT 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 NXT Energy will offset losses from the drop in NXT Energy's long position.MRC Global vs. NOV Inc | MRC Global vs. Ranger Energy Services | MRC Global vs. Oil States International | MRC Global vs. Geospace Technologies |
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Check out your portfolio center.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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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