Correlation Between Ford and NexGen Energy
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and NexGen Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and NexGen Energy, you can compare the effects of market volatilities on Ford 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 Ford with a short position of NexGen Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and NexGen Energy.
Diversification Opportunities for Ford and NexGen Energy
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and NexGen is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy and Ford 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 Ford Motor 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 Ford i.e., Ford and NexGen Energy go up and down completely randomly.
Pair Corralation between Ford and NexGen Energy
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the NexGen Energy. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 2.67 times less risky than NexGen Energy. The stock trades about -0.21 of its potential returns per unit of risk. The NexGen Energy is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 679.00 in NexGen Energy on September 12, 2024 and sell it today you would earn a total of 106.00 from holding NexGen Energy or generate 15.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ford Motor vs. NexGen Energy
Performance |
| Timeline |
| Ford Motor |
| NexGen Energy |
Ford and NexGen Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and NexGen Energy
The main advantage of trading using opposite Ford and NexGen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| NexGen Energy vs. CyberArk Software | NexGen Energy vs. Magic Software Enterprises | NexGen Energy vs. Quaker Chemical | NexGen Energy vs. Siamgas And Petrochemicals |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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