Correlation Between NexGen Energy and Ebro Foods
Can any of the company-specific risk be diversified away by investing in both NexGen Energy and Ebro Foods 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 Ebro Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NexGen Energy and Ebro Foods SA, you can compare the effects of market volatilities on NexGen Energy and Ebro Foods 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 Ebro Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of NexGen Energy and Ebro Foods.
Diversification Opportunities for NexGen Energy and Ebro Foods
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NexGen and Ebro is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and Ebro Foods SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods SA 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 Ebro Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebro Foods SA has no effect on the direction of NexGen Energy i.e., NexGen Energy and Ebro Foods go up and down completely randomly.
Pair Corralation between NexGen Energy and Ebro Foods
Assuming the 90 days horizon NexGen Energy is expected to generate 4.05 times more return on investment than Ebro Foods. However, NexGen Energy is 4.05 times more volatile than Ebro Foods SA. It trades about 0.19 of its potential returns per unit of risk. Ebro Foods SA is currently generating about -0.14 per unit of risk. If you would invest 656.00 in NexGen Energy on September 5, 2024 and sell it today you would earn a total of 118.00 from holding NexGen Energy or generate 17.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
NexGen Energy vs. Ebro Foods SA
Performance |
| Timeline |
| NexGen Energy |
| Ebro Foods SA |
NexGen Energy and Ebro Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NexGen Energy and Ebro Foods
The main advantage of trading using opposite NexGen Energy and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NexGen Energy position performs unexpectedly, Ebro Foods 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 Ebro Foods will offset losses from the drop in Ebro Foods' long position.| NexGen Energy vs. Ebro Foods SA | NexGen Energy vs. Xinhua Winshare Publishing | NexGen Energy vs. THAI BEVERAGE | NexGen Energy vs. Strategic Education |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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