Correlation Between Consumers Energy and Nextera Energy
Can any of the company-specific risk be diversified away by investing in both Consumers 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 Consumers 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 Consumers Energy and Nextera Energy, you can compare the effects of market volatilities on Consumers 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 Consumers Energy with a short position of Nextera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumers Energy and Nextera Energy.
Diversification Opportunities for Consumers Energy and Nextera Energy
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Consumers and Nextera is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Consumers Energy and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and Consumers 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 Consumers Energy 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 Consumers Energy i.e., Consumers Energy and Nextera Energy go up and down completely randomly.
Pair Corralation between Consumers Energy and Nextera Energy
Assuming the 90 days trading horizon Consumers Energy is expected to under-perform the Nextera Energy. But the preferred stock apears to be less risky and, when comparing its historical volatility, Consumers Energy is 2.27 times less risky than Nextera Energy. The preferred stock trades about -0.16 of its potential returns per unit of risk. The Nextera Energy is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 4,675 in Nextera Energy on August 24, 2024 and sell it today you would lose (264.00) from holding Nextera Energy or give up 5.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumers Energy vs. Nextera Energy
Performance |
| Timeline |
| Consumers Energy |
| Nextera Energy |
Consumers Energy and Nextera Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumers Energy and Nextera Energy
The main advantage of trading using opposite Consumers Energy and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumers 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.| Consumers Energy vs. Nextera Energy | Consumers Energy vs. Duke Energy | Consumers Energy vs. PGE Corp | Consumers Energy vs. Southern Company |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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