Correlation Between NXT Energy and Geospace Technologies
Can any of the company-specific risk be diversified away by investing in both NXT Energy and Geospace Technologies 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 NXT Energy and Geospace Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NXT Energy Solutions and Geospace Technologies, you can compare the effects of market volatilities on NXT Energy and Geospace Technologies 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 NXT Energy with a short position of Geospace Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXT Energy and Geospace Technologies.
Diversification Opportunities for NXT Energy and Geospace Technologies
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NXT and Geospace is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding NXT Energy Solutions and Geospace Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geospace Technologies and NXT 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 NXT Energy Solutions are associated (or correlated) with Geospace Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geospace Technologies has no effect on the direction of NXT Energy i.e., NXT Energy and Geospace Technologies go up and down completely randomly.
Pair Corralation between NXT Energy and Geospace Technologies
Assuming the 90 days horizon NXT Energy Solutions is expected to generate 2.02 times more return on investment than Geospace Technologies. However, NXT Energy is 2.02 times more volatile than Geospace Technologies. It trades about -0.01 of its potential returns per unit of risk. Geospace Technologies is currently generating about -0.02 per unit of risk. If you would invest 14.00 in NXT Energy Solutions on August 27, 2024 and sell it today you would lose (2.00) from holding NXT Energy Solutions or give up 14.29% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
NXT Energy Solutions vs. Geospace Technologies
Performance |
Timeline |
NXT Energy Solutions |
Geospace Technologies |
NXT Energy and Geospace Technologies Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NXT Energy and Geospace Technologies
The main advantage of trading using opposite NXT Energy and Geospace Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NXT Energy position performs unexpectedly, Geospace Technologies 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 Geospace Technologies will offset losses from the drop in Geospace Technologies' long position.NXT Energy vs. Petroleo Brasileiro Petrobras | NXT Energy vs. Equinor ASA ADR | NXT Energy vs. Eni SpA ADR | NXT Energy vs. YPF Sociedad Anonima |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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