Correlation Between NXG NextGen and Patria Investments

Can any of the company-specific risk be diversified away by investing in both NXG NextGen and Patria Investments 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 Patria Investments 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 Patria Investments, you can compare the effects of market volatilities on NXG NextGen and Patria Investments 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 Patria Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXG NextGen and Patria Investments.

Diversification Opportunities for NXG NextGen and Patria Investments

0.64

Correlation Coefficient

NXG NextGen  Patria Investments

Poor diversification

The 3 months correlation between NXG and Patria is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NXG NextGen Infrastructure and Patria Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patria Investments 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 Patria Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patria Investments has no effect on the direction of NXG NextGen i.e., NXG NextGen and Patria Investments go up and down completely randomly.

Pair Corralation between NXG NextGen and Patria Investments

Considering the 90-day investment horizon NXG NextGen Infrastructure is expected to generate 1.31 times more return on investment than Patria Investments. However, NXG NextGen is 1.31 times more volatile than Patria Investments. It trades about 0.05 of its potential returns per unit of risk. Patria Investments is currently generating about 0.0 per unit of risk. If you would invest  2,781  in NXG NextGen Infrastructure on September 23, 2024 and sell it today you would earn a total of  1,436  from holding NXG NextGen Infrastructure or generate 51.64% 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.  Patria Investments

NXG NextGen Infrastr

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NXG NextGen Infrastructure are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, NXG NextGen may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Patria Investments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Patria Investments is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NXG NextGen and Patria Investments

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

The idea behind NXG NextGen Infrastructure and Patria Investments 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.