Correlation Between JD Sports and Nextera Energy
Can any of the company-specific risk be diversified away by investing in both JD Sports and Nextera 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 JD Sports and Nextera Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JD Sports Fashion and Nextera Energy, you can compare the effects of market volatilities on JD Sports and Nextera 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 JD Sports with a short position of Nextera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and Nextera Energy.
Diversification Opportunities for JD Sports and Nextera Energy
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between JDDSF and Nextera is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and JD Sports 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 JD Sports Fashion are associated (or correlated) with Nextera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextera Energy has no effect on the direction of JD Sports i.e., JD Sports and Nextera Energy go up and down completely randomly.
Pair Corralation between JD Sports and Nextera Energy
Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Nextera Energy. In addition to that, JD Sports is 1.49 times more volatile than Nextera Energy. It trades about -0.01 of its total potential returns per unit of risk. Nextera Energy is currently generating about 0.02 per unit of volatility. If you would invest 4,043 in Nextera Energy on September 4, 2024 and sell it today you would earn a total of 285.00 from holding Nextera Energy or generate 7.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
JD Sports Fashion vs. Nextera Energy
Performance |
| Timeline |
| JD Sports Fashion |
| Nextera Energy |
JD Sports and Nextera Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD Sports and Nextera Energy
The main advantage of trading using opposite JD Sports and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, Nextera 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 Nextera Energy will offset losses from the drop in Nextera Energy's long position.The idea behind JD Sports Fashion and Nextera Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Nextera Energy vs. Sea | Nextera Energy vs. Getty Images Holdings | Nextera Energy vs. SunLink Health Systems | Nextera Energy vs. Simon Property Group |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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