Correlation Between Paladin Energy and NXG NextGen

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

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

Diversification Opportunities for Paladin Energy and NXG NextGen

-0.56

Correlation Coefficient

Paladin Energy  NXG NextGen

Excellent diversification

The 3 months correlation between Paladin and NXG is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Paladin Energy and NXG NextGen Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXG NextGen Infrastr and Paladin 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 Paladin Energy are associated (or correlated) with NXG NextGen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXG NextGen Infrastr has no effect on the direction of Paladin Energy i.e., Paladin Energy and NXG NextGen go up and down completely randomly.

Pair Corralation between Paladin Energy and NXG NextGen

Assuming the 90 days horizon Paladin Energy is expected to under-perform the NXG NextGen. In addition to that, Paladin Energy is 2.36 times more volatile than NXG NextGen Infrastructure. It trades about -0.07 of its total potential returns per unit of risk. NXG NextGen Infrastructure is currently generating about 0.07 per unit of volatility. If you would invest  3,815  in NXG NextGen Infrastructure on September 29, 2024 and sell it today you would earn a total of  563.00  from holding NXG NextGen Infrastructure or generate 14.76% return on investment over 90 days.

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

Paladin Energy  vs.  NXG NextGen Infrastructure

Paladin Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paladin Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

NXG NextGen Infrastr

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NXG NextGen Infrastructure are ranked lower than 5 (%) 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.

Pair Trading with Paladin Energy and NXG NextGen

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

The idea behind Paladin Energy and NXG NextGen Infrastructure 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.