Correlation Between Power Assets and Nextera Energy

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

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

Diversification Opportunities for Power Assets and Nextera Energy

0.37

Correlation Coefficient

Power Assets  Nextera Energy

Weak diversification

The 3 months correlation between Power and Nextera is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Power Assets Holdings and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and Power Assets 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 Power Assets Holdings 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 has no effect on the direction of Power Assets i.e., Power Assets and Nextera Energy go up and down completely randomly.

Pair Corralation between Power Assets and Nextera Energy

Assuming the 90 days horizon Power Assets Holdings is expected to under-perform the Nextera Energy. In addition to that, Power Assets is 1.77 times more volatile than Nextera Energy. It trades about 0.0 of its total potential returns per unit of risk. Nextera Energy is currently generating about 0.18 per unit of volatility. If you would invest  3,725  in Nextera Energy on March 14, 2024 and sell it today you would earn a total of  530.00  from holding Nextera Energy or generate 14.23% return on investment over 90 days.

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

Power Assets Holdings  vs.  Nextera Energy

Power Assets Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Assets Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Power Assets is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nextera Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nextera Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating 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 Power Assets and Nextera Energy

The main advantage of trading using opposite Power Assets and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Assets 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 Power Assets Holdings and Nextera Energy 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.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.