Correlation Between NextEra Energy and China Datang
Can any of the company-specific risk be diversified away by investing in both NextEra Energy and China Datang 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 NextEra Energy and China Datang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NextEra Energy and China Datang, you can compare the effects of market volatilities on NextEra Energy and China Datang 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 NextEra Energy with a short position of China Datang. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextEra Energy and China Datang.
Diversification Opportunities for NextEra Energy and China Datang
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NextEra and China is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding NextEra Energy and China Datang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Datang and NextEra 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 NextEra Energy are associated (or correlated) with China Datang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Datang has no effect on the direction of NextEra Energy i.e., NextEra Energy and China Datang go up and down completely randomly.
Pair Corralation between NextEra Energy and China Datang
Assuming the 90 days horizon NextEra Energy is expected to under-perform the China Datang. But the stock apears to be less risky and, when comparing its historical volatility, NextEra Energy is 1.53 times less risky than China Datang. The stock trades about -0.16 of its potential returns per unit of risk. The China Datang is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 23.00 in China Datang on October 26, 2024 and sell it today you would earn a total of 2.00 from holding China Datang or generate 8.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.5% |
| Values | Daily Returns |
NextEra Energy vs. China Datang
Performance |
| Timeline |
| NextEra Energy |
| China Datang |
NextEra Energy and China Datang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NextEra Energy and China Datang
The main advantage of trading using opposite NextEra Energy and China Datang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextEra Energy position performs unexpectedly, China Datang 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 China Datang will offset losses from the drop in China Datang's long position.| NextEra Energy vs. PROSIEBENSAT1 MEDIADR4 | NextEra Energy vs. Townsquare Media | NextEra Energy vs. Flutter Entertainment PLC | NextEra Energy vs. Martin Marietta Materials |
| China Datang vs. NextEra Energy | China Datang vs. The Southern | China Datang vs. VERBUND AG | China Datang vs. PGE Corporation |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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