Correlation Between NexGen Energy and ALX Uranium
Can any of the company-specific risk be diversified away by investing in both NexGen Energy and ALX Uranium 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 NexGen Energy and ALX Uranium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NexGen Energy and ALX Uranium Corp, you can compare the effects of market volatilities on NexGen Energy and ALX Uranium 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 NexGen Energy with a short position of ALX Uranium. Check out your portfolio center. Please also check ongoing floating volatility patterns of NexGen Energy and ALX Uranium.
Diversification Opportunities for NexGen Energy and ALX Uranium
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NexGen and ALX is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and ALX Uranium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALX Uranium Corp and NexGen 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 NexGen Energy are associated (or correlated) with ALX Uranium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALX Uranium Corp has no effect on the direction of NexGen Energy i.e., NexGen Energy and ALX Uranium go up and down completely randomly.
Pair Corralation between NexGen Energy and ALX Uranium
Assuming the 90 days trading horizon NexGen Energy is expected to generate 2.58 times less return on investment than ALX Uranium. But when comparing it to its historical volatility, NexGen Energy is 3.65 times less risky than ALX Uranium. It trades about 0.06 of its potential returns per unit of risk. ALX Uranium Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4.00 in ALX Uranium Corp on September 12, 2024 and sell it today you would lose (1.00) from holding ALX Uranium Corp or give up 25.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NexGen Energy vs. ALX Uranium Corp
Performance |
| Timeline |
| NexGen Energy |
| ALX Uranium Corp |
NexGen Energy and ALX Uranium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NexGen Energy and ALX Uranium
The main advantage of trading using opposite NexGen Energy and ALX Uranium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NexGen Energy position performs unexpectedly, ALX Uranium 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 ALX Uranium will offset losses from the drop in ALX Uranium's long position.| NexGen Energy vs. Enbridge Pref 5 | NexGen Energy vs. Enbridge Pref 11 | NexGen Energy vs. Enbridge Pref L | NexGen Energy vs. E Split Corp |
| ALX Uranium vs. ValOre Metals Corp | ALX Uranium vs. Forum Energy Metals | ALX Uranium vs. Purepoint Uranium Group | ALX Uranium vs. Blue Sky Uranium |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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