Correlation Between ReNew Energy and Nextera Energy

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

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

Diversification Opportunities for ReNew Energy and Nextera Energy

0.27

Correlation Coefficient

ReNew Energy  Nextera Energy

Modest diversification

The 3 months correlation between ReNew and Nextera is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding ReNew Energy Global 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 ReNew 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 ReNew Energy Global 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 ReNew Energy i.e., ReNew Energy and Nextera Energy go up and down completely randomly.

Pair Corralation between ReNew Energy and Nextera Energy

Assuming the 90 days horizon ReNew Energy Global is expected to generate 4.36 times more return on investment than Nextera Energy. However, ReNew Energy is 4.36 times more volatile than Nextera Energy Partners. It trades about 0.11 of its potential returns per unit of risk. Nextera Energy Partners is currently generating about 0.01 per unit of risk. If you would invest  50.00  in ReNew Energy Global on March 10, 2024 and sell it today you would earn a total of  7.00  from holding ReNew Energy Global or generate 14.0% return on investment over 90 days.

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

ReNew Energy Global  vs.  Nextera Energy Partners

ReNew Energy Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ReNew Energy Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ReNew Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Nextera Energy Partners

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nextera Energy Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak 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 ReNew Energy and Nextera Energy

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

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.