Correlation Between NXT Energy and Global Warming
Can any of the company-specific risk be diversified away by investing in both NXT Energy and Global Warming 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 Global Warming 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 Global Warming Solut, you can compare the effects of market volatilities on NXT Energy and Global Warming 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 Global Warming. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXT Energy and Global Warming.
Diversification Opportunities for NXT Energy and Global Warming
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NXT and Global is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding NXT Energy Solutions and Global Warming Solut in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Warming Solut 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 Global Warming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Warming Solut has no effect on the direction of NXT Energy i.e., NXT Energy and Global Warming go up and down completely randomly.
Pair Corralation between NXT Energy and Global Warming
Assuming the 90 days horizon NXT Energy is expected to generate 18.51 times less return on investment than Global Warming. But when comparing it to its historical volatility, NXT Energy Solutions is 1.26 times less risky than Global Warming. It trades about 0.01 of its potential returns per unit of risk. Global Warming Solut is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 95.00 in Global Warming Solut on September 22, 2024 and sell it today you would earn a total of 39.00 from holding Global Warming Solut or generate 41.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.73% |
| Values | Daily Returns |
NXT Energy Solutions vs. Global Warming Solut
Performance |
| Timeline |
| NXT Energy Solutions |
| Global Warming Solut |
NXT Energy and Global Warming Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NXT Energy and Global Warming
The main advantage of trading using opposite NXT Energy and Global Warming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NXT Energy position performs unexpectedly, Global Warming 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 Global Warming will offset losses from the drop in Global Warming's long position.| NXT Energy vs. Dawson Geophysical | NXT Energy vs. Bri Chem Corp | NXT Energy vs. NCS Multistage Holdings | NXT Energy vs. Bristow Group |
| Global Warming vs. Mind Technology | Global Warming vs. Wrap Technologies | Global Warming vs. Cepton Inc | Global Warming vs. Microvision |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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