Correlation Between NexGen Energy and Energy Fuels

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

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

Diversification Opportunities for NexGen Energy and Energy Fuels

0.91

Correlation Coefficient

NexGen Energy  Energy Fuels

Almost no diversification

The 3 months correlation between NexGen and Energy is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and Energy Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Fuels and NexGen 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 NexGen Energy are associated (or correlated) with Energy Fuels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Fuels has no effect on the direction of NexGen Energy i.e., NexGen Energy and Energy Fuels go up and down completely randomly.

Pair Corralation between NexGen Energy and Energy Fuels

Assuming the 90 days trading horizon NexGen Energy is expected to generate 0.95 times more return on investment than Energy Fuels. However, NexGen Energy is 1.05 times less risky than Energy Fuels. It trades about -0.07 of its potential returns per unit of risk. Energy Fuels is currently generating about -0.11 per unit of risk. If you would invest  1,131  in NexGen Energy on October 8, 2024 and sell it today you would lose (56.00) from holding NexGen Energy or give up 4.95% of portfolio value over 90 days.

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

NexGen Energy  vs.  Energy Fuels

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. In spite of very weak technical and fundamental indicators, NexGen Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Energy Fuels

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Fuels are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Energy Fuels displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NexGen Energy and Energy Fuels

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

The idea behind NexGen Energy and Energy Fuels 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..