Correlation Between NeXGold Mining and Transalta

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

By analyzing existing cross correlation between NeXGold Mining Corp and Transalta A Cum, you can compare the effects of market volatilities on NeXGold Mining and Transalta 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 NeXGold Mining with a short position of Transalta. Check out your portfolio center. Please also check ongoing floating volatility patterns of NeXGold Mining and Transalta.

Diversification Opportunities for NeXGold Mining and Transalta

-0.23

Correlation Coefficient

NeXGold Mining  Transalta

Very good diversification

The 3 months correlation between NeXGold and Transalta is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding NeXGold Mining Corp and Transalta A Cum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transalta A Cum and NeXGold Mining 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 NeXGold Mining Corp are associated (or correlated) with Transalta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transalta A Cum has no effect on the direction of NeXGold Mining i.e., NeXGold Mining and Transalta go up and down completely randomly.

Pair Corralation between NeXGold Mining and Transalta

Assuming the 90 days trading horizon NeXGold Mining Corp is expected to under-perform the Transalta. In addition to that, NeXGold Mining is 3.54 times more volatile than Transalta A Cum. It trades about -0.03 of its total potential returns per unit of risk. Transalta A Cum is currently generating about 0.08 per unit of volatility. If you would invest  1,468  in Transalta A Cum on September 14, 2024 and sell it today you would earn a total of  58.00  from holding Transalta A Cum or generate 3.95% return on investment over 90 days.

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

NeXGold Mining Corp  vs.  Transalta A Cum

NeXGold Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NeXGold Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, NeXGold Mining is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Transalta A Cum

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transalta A Cum are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Transalta is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NeXGold Mining and Transalta

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

The idea behind NeXGold Mining Corp and Transalta A Cum 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.