Correlation Between NXT Energy and Akastor ASA

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

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

Diversification Opportunities for NXT Energy and Akastor ASA

0.6

Correlation Coefficient

NXT Energy  Akastor ASA

Poor diversification

The 3 months correlation between NXT and Akastor is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NXT Energy Solutions and Akastor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akastor ASA and NXT Energy 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 NXT Energy Solutions are associated (or correlated) with Akastor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akastor ASA has no effect on the direction of NXT Energy i.e., NXT Energy and Akastor ASA go up and down completely randomly.

Pair Corralation between NXT Energy and Akastor ASA

Assuming the 90 days horizon NXT Energy Solutions is expected to generate 2.67 times more return on investment than Akastor ASA. However, NXT Energy is 2.67 times more volatile than Akastor ASA. It trades about 0.03 of its potential returns per unit of risk. Akastor ASA is currently generating about -0.23 per unit of risk. If you would invest  13.00  in NXT Energy Solutions on October 17, 2024 and sell it today you would earn a total of  0.00  from holding NXT Energy Solutions or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

NXT Energy Solutions  vs.  Akastor ASA

NXT Energy Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NXT Energy Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, NXT Energy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Akastor ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Akastor ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with NXT Energy and Akastor ASA

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

The idea behind NXT Energy Solutions and Akastor ASA 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.