Correlation Between CenterPoint Energy and Nextera Energy
Can any of the company-specific risk be diversified away by investing in both CenterPoint 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 CenterPoint 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 CenterPoint Energy and Nextera Energy, you can compare the effects of market volatilities on CenterPoint 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 CenterPoint Energy with a short position of Nextera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CenterPoint Energy and Nextera Energy.
Diversification Opportunities for CenterPoint Energy and Nextera Energy
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CenterPoint and Nextera is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and CenterPoint 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 CenterPoint 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 CenterPoint Energy i.e., CenterPoint Energy and Nextera Energy go up and down completely randomly.
Pair Corralation between CenterPoint Energy and Nextera Energy
Considering the 90-day investment horizon CenterPoint Energy is expected to generate 1.06 times less return on investment than Nextera Energy. In addition to that, CenterPoint Energy is 1.64 times more volatile than Nextera Energy. It trades about 0.02 of its total potential returns per unit of risk. Nextera Energy is currently generating about 0.04 per unit of volatility. If you would invest 2,119 in Nextera Energy on September 2, 2024 and sell it today you would earn a total of 318.00 from holding Nextera Energy or generate 15.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CenterPoint Energy vs. Nextera Energy
Performance |
| Timeline |
| CenterPoint Energy |
| Nextera Energy |
CenterPoint Energy and Nextera Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CenterPoint Energy and Nextera Energy
The main advantage of trading using opposite CenterPoint Energy and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CenterPoint 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.| CenterPoint Energy vs. DTE Energy | CenterPoint Energy vs. Alliant Energy Corp | CenterPoint Energy vs. Ameren Corp | CenterPoint Energy vs. Pinnacle West Capital |
| Nextera Energy vs. Pacific Gas and | Nextera Energy vs. Pacific Gas and | Nextera Energy vs. Pacific Gas and | Nextera Energy vs. Pacific Gas and |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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