Correlation Between NexGen Energy and S A P

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

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

Diversification Opportunities for NexGen Energy and S A P

-0.88

Correlation Coefficient

NexGen Energy  S A P

Pay attention - limited upside

The 3 months correlation between NexGen and SAP is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and Saputo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saputo Inc 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 S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saputo Inc has no effect on the direction of NexGen Energy i.e., NexGen Energy and S A P go up and down completely randomly.

Pair Corralation between NexGen Energy and S A P

Assuming the 90 days trading horizon NexGen Energy is expected to generate 2.86 times more return on investment than S A P. However, NexGen Energy is 2.86 times more volatile than Saputo Inc. It trades about 0.28 of its potential returns per unit of risk. Saputo Inc is currently generating about -0.19 per unit of risk. If you would invest  743.00  in NexGen Energy on September 3, 2024 and sell it today you would earn a total of  448.00  from holding NexGen Energy or generate 60.3% 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.  Saputo Inc

NexGen Energy

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, NexGen Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Saputo Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Saputo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with NexGen Energy and S A P

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

The idea behind NexGen Energy and Saputo Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.