Correlation Between NextEra Energy and Vulcan Materials
Can any of the company-specific risk be diversified away by investing in both NextEra Energy and Vulcan Materials 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 Vulcan Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NextEra Energy and Vulcan Materials, you can compare the effects of market volatilities on NextEra Energy and Vulcan Materials 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 Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextEra Energy and Vulcan Materials.
Diversification Opportunities for NextEra Energy and Vulcan Materials
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NextEra and Vulcan is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding NextEra Energy and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of NextEra Energy i.e., NextEra Energy and Vulcan Materials go up and down completely randomly.
Pair Corralation between NextEra Energy and Vulcan Materials
Assuming the 90 days horizon NextEra Energy is expected to generate 1.22 times more return on investment than Vulcan Materials. However, NextEra Energy is 1.22 times more volatile than Vulcan Materials. It trades about -0.02 of its potential returns per unit of risk. Vulcan Materials is currently generating about -0.12 per unit of risk. If you would invest 7,089 in NextEra Energy on September 12, 2024 and sell it today you would lose (59.00) from holding NextEra Energy or give up 0.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NextEra Energy vs. Vulcan Materials
Performance |
| Timeline |
| NextEra Energy |
| Vulcan Materials |
NextEra Energy and Vulcan Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NextEra Energy and Vulcan Materials
The main advantage of trading using opposite NextEra Energy and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextEra Energy position performs unexpectedly, Vulcan Materials 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 Vulcan Materials will offset losses from the drop in Vulcan Materials' long position.| NextEra Energy vs. Vulcan Materials | NextEra Energy vs. LPKF Laser Electronics | NextEra Energy vs. Arrow Electronics | NextEra Energy vs. Nucletron Electronic Aktiengesellschaft |
| Vulcan Materials vs. Heidelberg Materials AG | Vulcan Materials vs. Superior Plus Corp | Vulcan Materials vs. NMI Holdings | Vulcan Materials vs. SIVERS SEMICONDUCTORS AB |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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