Correlation Between NextEra Energy and Southern
Can any of the company-specific risk be diversified away by investing in both NextEra Energy and Southern 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 Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NextEra Energy and The Southern, you can compare the effects of market volatilities on NextEra Energy and Southern 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 Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextEra Energy and Southern.
Diversification Opportunities for NextEra Energy and Southern
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NextEra and Southern is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding NextEra Energy and The Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern 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 Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of NextEra Energy i.e., NextEra Energy and Southern go up and down completely randomly.
Pair Corralation between NextEra Energy and Southern
Assuming the 90 days horizon NextEra Energy is expected to generate 2.68 times less return on investment than Southern. In addition to that, NextEra Energy is 1.3 times more volatile than The Southern. It trades about 0.06 of its total potential returns per unit of risk. The Southern is currently generating about 0.19 per unit of volatility. If you would invest 7,860 in The Southern on October 21, 2024 and sell it today you would earn a total of 315.00 from holding The Southern or generate 4.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NextEra Energy vs. The Southern
Performance |
| Timeline |
| NextEra Energy |
| Southern |
NextEra Energy and Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NextEra Energy and Southern
The main advantage of trading using opposite NextEra Energy and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextEra Energy position performs unexpectedly, Southern 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 Southern will offset losses from the drop in Southern's long position.| NextEra Energy vs. The Southern | NextEra Energy vs. VERBUND AG | NextEra Energy vs. American Electric Power | NextEra Energy vs. PGE Corporation |
| Southern vs. NextEra Energy | Southern vs. VERBUND AG | Southern vs. American Electric Power | Southern 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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