Correlation Between NexGen Energy and Centrus Energy

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

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

Diversification Opportunities for NexGen Energy and Centrus Energy

0.03

Correlation Coefficient

NexGen Energy  Centrus Energy

Significant diversification

The 3 months correlation between NexGen and Centrus is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and Centrus Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrus Energy 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 Centrus Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrus Energy has no effect on the direction of NexGen Energy i.e., NexGen Energy and Centrus Energy go up and down completely randomly.

Pair Corralation between NexGen Energy and Centrus Energy

Considering the 90-day investment horizon NexGen Energy is expected to under-perform the Centrus Energy. But the stock apears to be less risky and, when comparing its historical volatility, NexGen Energy is 1.66 times less risky than Centrus Energy. The stock trades about -0.12 of its potential returns per unit of risk. The Centrus Energy is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,071  in Centrus Energy on December 27, 2024 and sell it today you would lose (161.00) from holding Centrus Energy or give up 2.28% of portfolio value over 90 days.

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

NexGen Energy  vs.  Centrus Energy

NexGen Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days NexGen Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Centrus Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Centrus Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Centrus Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NexGen Energy and Centrus Energy

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

The idea behind NexGen Energy and Centrus Energy 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.