Correlation Between Dynagas LNG and NexGen Energy

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

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

Diversification Opportunities for Dynagas LNG and NexGen Energy

0.72

Correlation Coefficient

Dynagas LNG  NexGen Energy

Poor diversification

The 3 months correlation between Dynagas and NexGen is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Dynagas LNG Partners and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy and Dynagas LNG 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 Dynagas LNG Partners 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 Dynagas LNG i.e., Dynagas LNG and NexGen Energy go up and down completely randomly.

Pair Corralation between Dynagas LNG and NexGen Energy

Given the investment horizon of 90 days Dynagas LNG is expected to generate 1.94 times less return on investment than NexGen Energy. But when comparing it to its historical volatility, Dynagas LNG Partners is 1.21 times less risky than NexGen Energy. It trades about 0.16 of its potential returns per unit of risk. NexGen Energy is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  547.00  in NexGen Energy on September 3, 2024 and sell it today you would earn a total of  297.00  from holding NexGen Energy or generate 54.3% return on investment over 90 days.

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

Dynagas LNG Partners  vs.  NexGen Energy

Dynagas LNG Partners

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dynagas LNG Partners are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Dynagas LNG reported solid returns over the last few months and may actually be approaching a breakup point.

NexGen Energy

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 19 (%) 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 Dynagas LNG and NexGen Energy

The main advantage of trading using opposite Dynagas LNG and NexGen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynagas LNG 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 Dynagas LNG Partners 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.