Correlation Between Talon Energy and Nextgen Healthcare

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

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

Diversification Opportunities for Talon Energy and Nextgen Healthcare

0.66

Correlation Coefficient

Talon Energy  Nextgen Healthcare

Poor diversification

The 3 months correlation between Talon and Nextgen is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Talon Energy and Nextgen Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextgen Healthcare and Talon 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 Talon Energy are associated (or correlated) with Nextgen Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextgen Healthcare has no effect on the direction of Talon Energy i.e., Talon Energy and Nextgen Healthcare go up and down completely randomly.

Pair Corralation between Talon Energy and Nextgen Healthcare

If you would invest  1,653  in Nextgen Healthcare on October 6, 2024 and sell it today you would earn a total of  0.00  from holding Nextgen Healthcare or generate 0.0% return on investment over 90 days.

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

Talon Energy  vs.  Nextgen Healthcare

Talon Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talon Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Talon Energy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Nextgen Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextgen Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Nextgen Healthcare is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Talon Energy and Nextgen Healthcare

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

The idea behind Talon Energy and Nextgen Healthcare 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 Global Correlations module to find global opportunities by holding instruments from different markets.