Correlation Between NextEra Energy and Consolidated Edison
Can any of the company-specific risk be diversified away by investing in both NextEra Energy and Consolidated Edison 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 Consolidated Edison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NextEra Energy and Consolidated Edison, you can compare the effects of market volatilities on NextEra Energy and Consolidated Edison 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 Consolidated Edison. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextEra Energy and Consolidated Edison.
Diversification Opportunities for NextEra Energy and Consolidated Edison
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NextEra and Consolidated is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding NextEra Energy and Consolidated Edison in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Edison 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 Consolidated Edison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Edison has no effect on the direction of NextEra Energy i.e., NextEra Energy and Consolidated Edison go up and down completely randomly.
Pair Corralation between NextEra Energy and Consolidated Edison
Assuming the 90 days horizon NextEra Energy is expected to under-perform the Consolidated Edison. But the stock apears to be less risky and, when comparing its historical volatility, NextEra Energy is 1.57 times less risky than Consolidated Edison. The stock trades about -0.02 of its potential returns per unit of risk. The Consolidated Edison is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 8,820 in Consolidated Edison on December 4, 2024 and sell it today you would earn a total of 774.00 from holding Consolidated Edison or generate 8.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
NextEra Energy vs. Consolidated Edison
Performance |
| Timeline |
| NextEra Energy |
| Consolidated Edison |
NextEra Energy and Consolidated Edison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NextEra Energy and Consolidated Edison
The main advantage of trading using opposite NextEra Energy and Consolidated Edison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextEra Energy position performs unexpectedly, Consolidated Edison 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 Consolidated Edison will offset losses from the drop in Consolidated Edison's long position.| NextEra Energy vs. Endeavour Mining PLC | NextEra Energy vs. BII Railway Transportation | NextEra Energy vs. DICKS Sporting Goods | NextEra Energy vs. ANTA Sports Products |
| Consolidated Edison vs. De Grey Mining | Consolidated Edison vs. ScanSource | Consolidated Edison vs. ADRIATIC METALS LS 013355 | Consolidated Edison vs. Summit Hotel Properties |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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