Correlation Between Energy Fuels and NexGen Energy

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

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

Diversification Opportunities for Energy Fuels and NexGen Energy

0.92

Correlation Coefficient

Energy Fuels  NexGen Energy

Almost no diversification

The 3 months correlation between Energy and NexGen is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Energy Fuels and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy and Energy Fuels 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 Energy Fuels are associated (or correlated) with NexGen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGen Energy has no effect on the direction of Energy Fuels i.e., Energy Fuels and NexGen Energy go up and down completely randomly.

Pair Corralation between Energy Fuels and NexGen Energy

Given the investment horizon of 90 days Energy Fuels is expected to generate 1.36 times more return on investment than NexGen Energy. However, Energy Fuels is 1.36 times more volatile than NexGen Energy. It trades about 0.14 of its potential returns per unit of risk. NexGen Energy is currently generating about 0.18 per unit of risk. If you would invest  490.00  in Energy Fuels on August 30, 2024 and sell it today you would earn a total of  190.00  from holding Energy Fuels or generate 38.78% return on investment over 90 days.

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

Energy Fuels  vs.  NexGen Energy

Energy Fuels

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Fuels are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Energy Fuels unveiled solid returns over the last few months and may actually be approaching a breakup point.

NexGen Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, NexGen Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energy Fuels and NexGen Energy

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

The idea behind Energy Fuels and NexGen 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..