Correlation Between Datang International and NexGen Energy
Can any of the company-specific risk be diversified away by investing in both Datang International 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 Datang International and NexGen Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Datang International Power and NexGen Energy, you can compare the effects of market volatilities on Datang International 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 Datang International with a short position of NexGen Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datang International and NexGen Energy.
Diversification Opportunities for Datang International and NexGen Energy
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Datang and NexGen is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Datang International Power and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy and Datang International 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 Datang International Power 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 Datang International i.e., Datang International and NexGen Energy go up and down completely randomly.
Pair Corralation between Datang International and NexGen Energy
Assuming the 90 days horizon Datang International is expected to generate 14.04 times less return on investment than NexGen Energy. But when comparing it to its historical volatility, Datang International Power is 1.44 times less risky than NexGen Energy. It trades about 0.01 of its potential returns per unit of risk. NexGen Energy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 686.00 in NexGen Energy on September 15, 2024 and sell it today you would earn a total of 63.00 from holding NexGen Energy or generate 9.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Datang International Power vs. NexGen Energy
Performance |
| Timeline |
| Datang International |
| NexGen Energy |
Datang International and NexGen Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Datang International and NexGen Energy
The main advantage of trading using opposite Datang International and NexGen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Datang International 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.| Datang International vs. CN YANGTPWR GDR | Datang International vs. SIEMENS ENERGY AG | Datang International vs. Siemens Energy AG | Datang International vs. Vistra Corp |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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