Correlation Between Awilco Drilling and Nextera Energy
Can any of the company-specific risk be diversified away by investing in both Awilco Drilling 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 Awilco Drilling and Nextera Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Awilco Drilling PLC and Nextera Energy, you can compare the effects of market volatilities on Awilco Drilling 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 Awilco Drilling with a short position of Nextera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Awilco Drilling and Nextera Energy.
Diversification Opportunities for Awilco Drilling and Nextera Energy
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Awilco and Nextera is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Awilco Drilling PLC and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and Awilco Drilling 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 Awilco Drilling PLC 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 Awilco Drilling i.e., Awilco Drilling and Nextera Energy go up and down completely randomly.
Pair Corralation between Awilco Drilling and Nextera Energy
Assuming the 90 days horizon Awilco Drilling PLC is expected to generate 0.29 times more return on investment than Nextera Energy. However, Awilco Drilling PLC is 3.45 times less risky than Nextera Energy. It trades about -0.22 of its potential returns per unit of risk. Nextera Energy is currently generating about -0.17 per unit of risk. If you would invest 197.00 in Awilco Drilling PLC on August 28, 2024 and sell it today you would lose (5.00) from holding Awilco Drilling PLC or give up 2.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Awilco Drilling PLC vs. Nextera Energy
Performance |
| Timeline |
| Awilco Drilling PLC |
| Nextera Energy |
Awilco Drilling and Nextera Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Awilco Drilling and Nextera Energy
The main advantage of trading using opposite Awilco Drilling and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Awilco Drilling 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.| Awilco Drilling vs. Noble plc | Awilco Drilling vs. Sinopec Oilfield Service | Awilco Drilling vs. Transocean | Awilco Drilling vs. Helmerich and Payne |
| Nextera Energy vs. Dominion Energy | Nextera Energy vs. Consolidated Edison | Nextera Energy vs. Eversource Energy | Nextera Energy vs. FirstEnergy |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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