Correlation Between Uranium Energy and NexGen Energy

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

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

Diversification Opportunities for Uranium Energy and NexGen Energy

0.46

Correlation Coefficient

Uranium Energy  NexGen Energy

Very weak diversification

The 3 months correlation between Uranium and NexGen is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Uranium Energy Corp and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy and Uranium 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 Uranium Energy Corp are associated (or correlated) with NexGen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGen Energy has no effect on the direction of Uranium Energy i.e., Uranium Energy and NexGen Energy go up and down completely randomly.

Pair Corralation between Uranium Energy and NexGen Energy

Considering the 90-day investment horizon Uranium Energy is expected to generate 1.38 times less return on investment than NexGen Energy. In addition to that, Uranium Energy is 1.06 times more volatile than NexGen Energy. It trades about 0.07 of its total potential returns per unit of risk. NexGen Energy is currently generating about 0.09 per unit of volatility. If you would invest  564.00  in NexGen Energy on January 20, 2024 and sell it today you would earn a total of  200.00  from holding NexGen Energy or generate 35.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.19%
Values	Daily Returns

Uranium Energy Corp  vs.  NexGen Energy

Uranium Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Uranium Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

NexGen Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, NexGen Energy may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Uranium Energy and NexGen Energy

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

The idea behind Uranium Energy Corp and NexGen Energy 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.