Correlation Between Cars and Nextera Energy
Can any of the company-specific risk be diversified away by investing in both Cars 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 Cars and Nextera Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Nextera Energy, you can compare the effects of market volatilities on Cars 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 Cars with a short position of Nextera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Nextera Energy.
Diversification Opportunities for Cars and Nextera Energy
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cars and Nextera is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and Cars 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 Cars Inc 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 Cars i.e., Cars and Nextera Energy go up and down completely randomly.
Pair Corralation between Cars and Nextera Energy
Given the investment horizon of 90 days Cars Inc is expected to generate 1.44 times more return on investment than Nextera Energy. However, Cars is 1.44 times more volatile than Nextera Energy. It trades about 0.1 of its potential returns per unit of risk. Nextera Energy is currently generating about -0.11 per unit of risk. If you would invest 1,708 in Cars Inc on September 12, 2024 and sell it today you would earn a total of 226.00 from holding Cars Inc or generate 13.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cars Inc vs. Nextera Energy
Performance |
| Timeline |
| Cars Inc |
| Nextera Energy |
Cars and Nextera Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and Nextera Energy
The main advantage of trading using opposite Cars and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars 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 Cars Inc 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.| Nextera Energy vs. Ralph Lauren Corp | Nextera Energy vs. Emerson Radio | Nextera Energy vs. Sphere Entertainment Co | Nextera Energy vs. Ross Stores |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |