Correlation Between Atlantica Sustainable and Nextera Energy

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

By analyzing existing cross correlation between Atlantica Sustainable Infrastructure and Nextera Energy Partners, you can compare the effects of market volatilities on Atlantica Sustainable and Nextera 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 Atlantica Sustainable with a short position of Nextera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlantica Sustainable and Nextera Energy.

Diversification Opportunities for Atlantica Sustainable and Nextera Energy

0.84

Correlation Coefficient

Atlantica Sustainable  Nextera Energy

Very poor diversification

The 3 months correlation between Atlantica and Nextera is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Atlantica Sustainable Infrastr and Nextera Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy Partners and Atlantica Sustainable 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 Atlantica Sustainable Infrastructure are associated (or correlated) with Nextera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextera Energy Partners has no effect on the direction of Atlantica Sustainable i.e., Atlantica Sustainable and Nextera Energy go up and down completely randomly.

Pair Corralation between Atlantica Sustainable and Nextera Energy

Allowing for the 90-day total investment horizon Atlantica Sustainable Infrastructure is expected to generate 1.02 times more return on investment than Nextera Energy. However, Atlantica Sustainable is 1.02 times more volatile than Nextera Energy Partners. It trades about 0.42 of its potential returns per unit of risk. Nextera Energy Partners is currently generating about 0.42 per unit of risk. If you would invest  1,767  in Atlantica Sustainable Infrastructure on February 17, 2024 and sell it today you would earn a total of  526.00  from holding Atlantica Sustainable Infrastructure or generate 29.77% return on investment over 90 days.

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

Atlantica Sustainable Infrastr  vs.  Nextera Energy Partners

Atlantica Sustainable

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atlantica Sustainable Infrastructure are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Atlantica Sustainable showed solid returns over the last few months and may actually be approaching a breakup point.

Nextera Energy Partners

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nextera Energy Partners are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical and fundamental indicators, Nextera Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Atlantica Sustainable and Nextera Energy

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

The idea behind Atlantica Sustainable Infrastructure and Nextera Energy Partners 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.