Correlation Between Gold Fields and NXT Energy
Can any of the company-specific risk be diversified away by investing in both Gold Fields and NXT 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 Gold Fields and NXT Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Fields Ltd and NXT Energy Solutions, you can compare the effects of market volatilities on Gold Fields and NXT 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 Gold Fields with a short position of NXT Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Fields and NXT Energy.
Diversification Opportunities for Gold Fields and NXT Energy
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gold and NXT is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and NXT Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXT Energy Solutions and Gold Fields 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 Gold Fields Ltd are associated (or correlated) with NXT Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXT Energy Solutions has no effect on the direction of Gold Fields i.e., Gold Fields and NXT Energy go up and down completely randomly.
Pair Corralation between Gold Fields and NXT Energy
Considering the 90-day investment horizon Gold Fields is expected to generate 1.86 times less return on investment than NXT Energy. But when comparing it to its historical volatility, Gold Fields Ltd is 6.53 times less risky than NXT Energy. It trades about 0.47 of its potential returns per unit of risk. NXT Energy Solutions is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 13.00 in NXT Energy Solutions on November 3, 2024 and sell it today you would earn a total of 3.00 from holding NXT Energy Solutions or generate 23.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Fields Ltd vs. NXT Energy Solutions
Performance |
| Timeline |
| Gold Fields |
| NXT Energy Solutions |
Gold Fields and NXT Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Fields and NXT Energy
The main advantage of trading using opposite Gold Fields and NXT Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Fields position performs unexpectedly, NXT 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 NXT Energy will offset losses from the drop in NXT Energy's long position.| Gold Fields vs. Agnico Eagle Mines | Gold Fields vs. Kinross Gold | Gold Fields vs. Harmony Gold Mining | Gold Fields vs. Franco Nevada |
| NXT Energy vs. Dawson Geophysical | NXT Energy vs. Bri Chem Corp | NXT Energy vs. NCS Multistage Holdings | NXT Energy vs. Bristow Group |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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