Correlation Between NXG NextGen and Federated Investors

Can any of the company-specific risk be diversified away by investing in both NXG NextGen and Federated Investors 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 NXG NextGen and Federated Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NXG NextGen Infrastructure and Federated Investors B, you can compare the effects of market volatilities on NXG NextGen and Federated Investors 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 NXG NextGen with a short position of Federated Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXG NextGen and Federated Investors.

Diversification Opportunities for NXG NextGen and Federated Investors

0.02

Correlation Coefficient

NXG NextGen  Federated Investors

Significant diversification

The 3 months correlation between NXG and Federated is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding NXG NextGen Infrastructure and Federated Investors B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Investors and NXG NextGen 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 NXG NextGen Infrastructure are associated (or correlated) with Federated Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Investors has no effect on the direction of NXG NextGen i.e., NXG NextGen and Federated Investors go up and down completely randomly.

Pair Corralation between NXG NextGen and Federated Investors

Considering the 90-day investment horizon NXG NextGen Infrastructure is expected to generate 1.05 times more return on investment than Federated Investors. However, NXG NextGen is 1.05 times more volatile than Federated Investors B. It trades about 0.18 of its potential returns per unit of risk. Federated Investors B is currently generating about 0.02 per unit of risk. If you would invest  2,921  in NXG NextGen Infrastructure on February 2, 2024 and sell it today you would earn a total of  979.00  from holding NXG NextGen Infrastructure or generate 33.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NXG NextGen Infrastructure  vs.  Federated Investors B

NXG NextGen Infrastr

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NXG NextGen Infrastructure are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, NXG NextGen reported solid returns over the last few months and may actually be approaching a breakup point.

Federated Investors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Investors B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Federated Investors is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with NXG NextGen and Federated Investors

The main advantage of trading using opposite NXG NextGen and Federated Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NXG NextGen position performs unexpectedly, Federated Investors 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 Federated Investors will offset losses from the drop in Federated Investors' long position.

The idea behind NXG NextGen Infrastructure and Federated Investors B 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.