Correlation Between SMG Industries and NXT Energy
Can any of the company-specific risk be diversified away by investing in both SMG Industries 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 SMG Industries and NXT Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMG Industries and NXT Energy Solutions, you can compare the effects of market volatilities on SMG Industries 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 SMG Industries with a short position of NXT Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMG Industries and NXT Energy.
Diversification Opportunities for SMG Industries and NXT Energy
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SMG and NXT is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding SMG Industries 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 SMG Industries 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 SMG Industries 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 SMG Industries i.e., SMG Industries and NXT Energy go up and down completely randomly.
Pair Corralation between SMG Industries and NXT Energy
Given the investment horizon of 90 days SMG Industries is expected to under-perform the NXT Energy. In addition to that, SMG Industries is 1.52 times more volatile than NXT Energy Solutions. It trades about -0.08 of its total potential returns per unit of risk. NXT Energy Solutions is currently generating about 0.09 per unit of volatility. If you would invest 9.00 in NXT Energy Solutions on August 31, 2024 and sell it today you would earn a total of 7.00 from holding NXT Energy Solutions or generate 77.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMG Industries vs. NXT Energy Solutions
Performance |
| Timeline |
| SMG Industries |
| NXT Energy Solutions |
SMG Industries and NXT Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMG Industries and NXT Energy
The main advantage of trading using opposite SMG Industries and NXT Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMG Industries 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.| SMG Industries vs. Expro Group Holdings | SMG Industries vs. ChampionX | SMG Industries vs. Ranger Energy Services | SMG Industries vs. Cactus Inc |
| NXT Energy vs. Petroleo Brasileiro Petrobras | NXT Energy vs. Equinor ASA ADR | NXT Energy vs. Eni SpA ADR | NXT Energy vs. YPF Sociedad Anonima |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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