Correlation Between NexGen Energy and Definity Financial

Can any of the company-specific risk be diversified away by investing in both NexGen Energy and Definity Financial 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 Definity Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NexGen Energy and Definity Financial Corp, you can compare the effects of market volatilities on NexGen Energy and Definity Financial 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 Definity Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of NexGen Energy and Definity Financial.

Diversification Opportunities for NexGen Energy and Definity Financial

-0.45

Correlation Coefficient

NexGen Energy  Definity Financial

Very good diversification

The 3 months correlation between NexGen and Definity is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and Definity Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Definity Financial 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 Definity Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Definity Financial Corp has no effect on the direction of NexGen Energy i.e., NexGen Energy and Definity Financial go up and down completely randomly.

Pair Corralation between NexGen Energy and Definity Financial

Assuming the 90 days trading horizon NexGen Energy is expected to generate 1.31 times less return on investment than Definity Financial. In addition to that, NexGen Energy is 2.31 times more volatile than Definity Financial Corp. It trades about 0.03 of its total potential returns per unit of risk. Definity Financial Corp is currently generating about 0.1 per unit of volatility. If you would invest  3,535  in Definity Financial Corp on February 1, 2025 and sell it today you would earn a total of  3,278  from holding Definity Financial Corp or generate 92.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NexGen Energy  vs.  Definity Financial Corp

NexGen Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days NexGen Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in June 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Definity Financial Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Definity Financial Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Definity Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NexGen Energy and Definity Financial

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

The idea behind NexGen Energy and Definity Financial Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.