Correlation Between NextEra Energy and Eversource Energy
Can any of the company-specific risk be diversified away by investing in both NextEra Energy and Eversource 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 NextEra Energy and Eversource Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NextEra Energy and Eversource Energy, you can compare the effects of market volatilities on NextEra Energy and Eversource 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 NextEra Energy with a short position of Eversource Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextEra Energy and Eversource Energy.
Diversification Opportunities for NextEra Energy and Eversource Energy
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NextEra and Eversource is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding NextEra Energy and Eversource Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eversource Energy 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 Eversource Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eversource Energy has no effect on the direction of NextEra Energy i.e., NextEra Energy and Eversource Energy go up and down completely randomly.
Pair Corralation between NextEra Energy and Eversource Energy
Assuming the 90 days horizon NextEra Energy is expected to generate 0.99 times more return on investment than Eversource Energy. However, NextEra Energy is 1.01 times less risky than Eversource Energy. It trades about 0.05 of its potential returns per unit of risk. Eversource Energy is currently generating about 0.04 per unit of risk. If you would invest 7,176 in NextEra Energy on August 30, 2024 and sell it today you would earn a total of 325.00 from holding NextEra Energy or generate 4.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NextEra Energy vs. Eversource Energy
Performance |
| Timeline |
| NextEra Energy |
| Eversource Energy |
NextEra Energy and Eversource Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NextEra Energy and Eversource Energy
The main advantage of trading using opposite NextEra Energy and Eversource Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextEra Energy position performs unexpectedly, Eversource 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 Eversource Energy will offset losses from the drop in Eversource Energy's long position.| NextEra Energy vs. GREENX METALS LTD | NextEra Energy vs. Jacquet Metal Service | NextEra Energy vs. Addus HomeCare | NextEra Energy vs. Tri Pointe Homes |
| Eversource Energy vs. National Beverage Corp | Eversource Energy vs. Kaiser Aluminum | Eversource Energy vs. AUSNUTRIA DAIRY | Eversource Energy vs. PREMIER FOODS |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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