Correlation Between NexGen Energy and Bip Investment

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Can any of the company-specific risk be diversified away by investing in both NexGen Energy and Bip Investment 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 Bip Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NexGen Energy and Bip Investment Corp, you can compare the effects of market volatilities on NexGen Energy and Bip Investment 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 Bip Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of NexGen Energy and Bip Investment.

Diversification Opportunities for NexGen Energy and Bip Investment

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between NexGen and Bip is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and Bip Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bip Investment 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 Bip Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bip Investment Corp has no effect on the direction of NexGen Energy i.e., NexGen Energy and Bip Investment go up and down completely randomly.

Pair Corralation between NexGen Energy and Bip Investment

Assuming the 90 days trading horizon NexGen Energy is expected to generate 2.62 times more return on investment than Bip Investment. However, NexGen Energy is 2.62 times more volatile than Bip Investment Corp. It trades about 0.2 of its potential returns per unit of risk. Bip Investment Corp is currently generating about 0.09 per unit of risk. If you would invest  752.00  in NexGen Energy on July 7, 2024 and sell it today you would earn a total of  187.00  from holding NexGen Energy or generate 24.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy97.73%
ValuesDaily Returns

NexGen Energy  vs.  Bip Investment Corp

 Performance 
       Timeline  
NexGen Energy 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, NexGen Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Bip Investment Corp 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Bip Investment Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Bip Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NexGen Energy and Bip Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NexGen Energy and Bip Investment

The main advantage of trading using opposite NexGen Energy and Bip Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NexGen Energy position performs unexpectedly, Bip Investment 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 Bip Investment will offset losses from the drop in Bip Investment's long position.
The idea behind NexGen Energy and Bip Investment 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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