Correlation Between NXT Energy and Geospace Technologies

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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 Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

NXT Energy Solutions  vs.  Geospace Technologies

 Performance 
       Timeline  
NXT Energy Solutions 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in NXT Energy Solutions are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, NXT Energy reported solid returns over the last few months and may actually be approaching a breakup point.
Geospace Technologies 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Geospace Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Geospace Technologies may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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.
The idea behind NXT Energy Solutions and Geospace Technologies 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.
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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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