Correlation Between NexGen Energy and Uranium Energy

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

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

Diversification Opportunities for NexGen Energy and Uranium Energy

0.97

Correlation Coefficient

NexGen Energy  Uranium Energy

Almost no diversification

The 3 months correlation between NexGen and Uranium is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and Uranium Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uranium Energy Corp 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 Uranium Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uranium Energy Corp has no effect on the direction of NexGen Energy i.e., NexGen Energy and Uranium Energy go up and down completely randomly.

Pair Corralation between NexGen Energy and Uranium Energy

Considering the 90-day investment horizon NexGen Energy is expected to generate 0.81 times more return on investment than Uranium Energy. However, NexGen Energy is 1.23 times less risky than Uranium Energy. It trades about 0.24 of its potential returns per unit of risk. Uranium Energy Corp is currently generating about 0.17 per unit of risk. If you would invest  723.00  in NexGen Energy on September 2, 2024 and sell it today you would earn a total of  121.00  from holding NexGen Energy or generate 16.74% return on investment over 90 days.

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

NexGen Energy  vs.  Uranium Energy Corp

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.

Uranium Energy Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Uranium Energy Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Uranium Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NexGen Energy and Uranium Energy

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

The idea behind NexGen Energy and Uranium Energy Corp 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.