Correlation Between NXG NextGen and GAMCO Natural

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

By analyzing existing cross correlation between NXG NextGen Infrastructure and GAMCO Natural Resources, you can compare the effects of market volatilities on NXG NextGen and GAMCO Natural 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 NXG NextGen with a short position of GAMCO Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXG NextGen and GAMCO Natural.

Diversification Opportunities for NXG NextGen and GAMCO Natural

0.7

Correlation Coefficient

NXG NextGen  GAMCO Natural

Poor diversification

The 3 months correlation between NXG and GAMCO is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding NXG NextGen Infrastructure and GAMCO Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMCO Natural Resources and NXG NextGen 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 NXG NextGen Infrastructure are associated (or correlated) with GAMCO Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMCO Natural Resources has no effect on the direction of NXG NextGen i.e., NXG NextGen and GAMCO Natural go up and down completely randomly.

Pair Corralation between NXG NextGen and GAMCO Natural

Considering the 90-day investment horizon NXG NextGen Infrastructure is expected to generate 2.5 times more return on investment than GAMCO Natural. However, NXG NextGen is 2.5 times more volatile than GAMCO Natural Resources. It trades about 0.11 of its potential returns per unit of risk. GAMCO Natural Resources is currently generating about 0.23 per unit of risk. If you would invest  4,280  in NXG NextGen Infrastructure on December 26, 2024 and sell it today you would earn a total of  605.00  from holding NXG NextGen Infrastructure or generate 14.14% return on investment over 90 days.

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

NXG NextGen Infrastructure  vs.  GAMCO Natural Resources

NXG NextGen Infrastr

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NXG NextGen Infrastructure are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, NXG NextGen reported solid returns over the last few months and may actually be approaching a breakup point.

GAMCO Natural Resources

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GAMCO Natural Resources are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, GAMCO Natural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NXG NextGen and GAMCO Natural

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

The idea behind NXG NextGen Infrastructure and GAMCO Natural Resources 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.