Correlation Between Armada Hflr and NexGen Energy

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

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

Diversification Opportunities for Armada Hflr and NexGen Energy

-0.34

Correlation Coefficient

Armada Hflr  NexGen Energy

Very good diversification

The 3 months correlation between Armada and NexGen is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy and Armada Hflr 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 Armada Hflr Pr 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 Armada Hflr i.e., Armada Hflr and NexGen Energy go up and down completely randomly.

Pair Corralation between Armada Hflr and NexGen Energy

Considering the 90-day investment horizon Armada Hflr Pr is expected to generate 0.44 times more return on investment than NexGen Energy. However, Armada Hflr Pr is 2.3 times less risky than NexGen Energy. It trades about -0.21 of its potential returns per unit of risk. NexGen Energy is currently generating about -0.17 per unit of risk. If you would invest  1,094  in Armada Hflr Pr on September 21, 2024 and sell it today you would lose (65.00) from holding Armada Hflr Pr or give up 5.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.3%
Values	Daily Returns

Armada Hflr Pr  vs.  NexGen Energy

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

NexGen Energy

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 6 (%) 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.

Pair Trading with Armada Hflr and NexGen Energy

The main advantage of trading using opposite Armada Hflr and NexGen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr 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 Armada Hflr Pr 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.