Correlation Between Centrus Energy and NexGen Energy

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

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

Diversification Opportunities for Centrus Energy and NexGen Energy

0.83

Correlation Coefficient

Centrus Energy  NexGen Energy

Very poor diversification

The 3 months correlation between Centrus and NexGen is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Centrus Energy and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy and Centrus 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 Centrus Energy 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 Centrus Energy i.e., Centrus Energy and NexGen Energy go up and down completely randomly.

Pair Corralation between Centrus Energy and NexGen Energy

Considering the 90-day investment horizon Centrus Energy is expected to generate 2.81 times more return on investment than NexGen Energy. However, Centrus Energy is 2.81 times more volatile than NexGen Energy. It trades about 0.2 of its potential returns per unit of risk. NexGen Energy is currently generating about 0.23 per unit of risk. If you would invest  3,676  in Centrus Energy on September 4, 2024 and sell it today you would earn a total of  4,571  from holding Centrus Energy or generate 124.35% return on investment over 90 days.

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

Centrus Energy  vs.  NexGen Energy

Centrus Energy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Centrus Energy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Centrus Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

NexGen Energy

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 17 (%) 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 Centrus Energy and NexGen Energy

The main advantage of trading using opposite Centrus Energy and NexGen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrus Energy 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 Centrus Energy 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.