Correlation Between NXT Energy and Eupraxia Pharmaceuticals

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

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

Diversification Opportunities for NXT Energy and Eupraxia Pharmaceuticals

-0.44

Correlation Coefficient

NXT Energy  Eupraxia Pharmaceuticals

Very good diversification

The 3 months correlation between NXT and Eupraxia is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding NXT Energy Solutions and Eupraxia Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eupraxia Pharmaceuticals and NXT 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 NXT Energy Solutions are associated (or correlated) with Eupraxia Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eupraxia Pharmaceuticals has no effect on the direction of NXT Energy i.e., NXT Energy and Eupraxia Pharmaceuticals go up and down completely randomly.

Pair Corralation between NXT Energy and Eupraxia Pharmaceuticals

Assuming the 90 days horizon NXT Energy Solutions is expected to generate 1.95 times more return on investment than Eupraxia Pharmaceuticals. However, NXT Energy is 1.95 times more volatile than Eupraxia Pharmaceuticals. It trades about 0.0 of its potential returns per unit of risk. Eupraxia Pharmaceuticals is currently generating about -0.17 per unit of risk. If you would invest  13.00  in NXT Energy Solutions on January 31, 2024 and sell it today you would lose (1.00) from holding NXT Energy Solutions or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

NXT Energy Solutions  vs.  Eupraxia Pharmaceuticals

NXT Energy Solutions

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NXT Energy Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, NXT Energy may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Eupraxia Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NXT Energy and Eupraxia Pharmaceuticals

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

The idea behind NXT Energy Solutions and Eupraxia Pharmaceuticals 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.