Correlation Between NexGen Energy and Exro Technologies

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

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

Diversification Opportunities for NexGen Energy and Exro Technologies

-0.81

Correlation Coefficient

NexGen Energy  Exro Technologies

Pay attention - limited upside

The 3 months correlation between NexGen and Exro is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and Exro Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exro Technologies 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 Exro Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exro Technologies has no effect on the direction of NexGen Energy i.e., NexGen Energy and Exro Technologies go up and down completely randomly.

Pair Corralation between NexGen Energy and Exro Technologies

Assuming the 90 days trading horizon NexGen Energy is expected to generate 0.3 times more return on investment than Exro Technologies. However, NexGen Energy is 3.34 times less risky than Exro Technologies. It trades about 0.18 of its potential returns per unit of risk. Exro Technologies is currently generating about -0.16 per unit of risk. If you would invest  1,011  in NexGen Energy on September 12, 2024 and sell it today you would earn a total of  121.00  from holding NexGen Energy or generate 11.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

NexGen Energy  vs.  Exro Technologies

NexGen Energy

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, NexGen Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Exro Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exro Technologies 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 Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with NexGen Energy and Exro Technologies

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

The idea behind NexGen Energy and Exro Technologies 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.