Correlation Between Bristow and NXT Energy

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

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

Diversification Opportunities for Bristow and NXT Energy

-0.82

Correlation Coefficient

Bristow  NXT Energy

Pay attention - limited upside

The 3 months correlation between Bristow and NXT is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bristow Group and NXT Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXT Energy Solutions and Bristow 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 Bristow Group are associated (or correlated) with NXT Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXT Energy Solutions has no effect on the direction of Bristow i.e., Bristow and NXT Energy go up and down completely randomly.

Pair Corralation between Bristow and NXT Energy

Given the investment horizon of 90 days Bristow Group is expected to generate 0.32 times more return on investment than NXT Energy. However, Bristow Group is 3.1 times less risky than NXT Energy. It trades about 0.19 of its potential returns per unit of risk. NXT Energy Solutions is currently generating about -0.11 per unit of risk. If you would invest  2,732  in Bristow Group on March 3, 2024 and sell it today you would earn a total of  859.00  from holding Bristow Group or generate 31.44% return on investment over 90 days.

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

Bristow Group  vs.  NXT Energy Solutions

Bristow Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bristow Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Bristow disclosed solid returns over the last few months and may actually be approaching a breakup point.

NXT Energy Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NXT Energy Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bristow and NXT Energy

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

The idea behind Bristow Group and NXT Energy Solutions 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.