Correlation Between NexGen Energy and Anfield Resources

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

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

Diversification Opportunities for NexGen Energy and Anfield Resources

0.47

Correlation Coefficient

NexGen Energy  Anfield Resources

Very weak diversification

The 3 months correlation between NexGen and Anfield is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and Anfield Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anfield Resources and NexGen 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 NexGen Energy are associated (or correlated) with Anfield Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anfield Resources has no effect on the direction of NexGen Energy i.e., NexGen Energy and Anfield Resources go up and down completely randomly.

Pair Corralation between NexGen Energy and Anfield Resources

Assuming the 90 days horizon NexGen Energy is expected to generate 0.29 times more return on investment than Anfield Resources. However, NexGen Energy is 3.41 times less risky than Anfield Resources. It trades about -0.44 of its potential returns per unit of risk. Anfield Resources is currently generating about -0.19 per unit of risk. If you would invest  856.00  in NexGen Energy on September 25, 2024 and sell it today you would lose (210.00) from holding NexGen Energy or give up 24.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

NexGen Energy  vs.  Anfield Resources

NexGen Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NexGen Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Anfield Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anfield Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, Anfield Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NexGen Energy and Anfield Resources

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

The idea behind NexGen Energy and Anfield 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.