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 Southern Co, 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
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nextera and Southern is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy and Southern Co 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 trading horizon Nextera Energy is expected to under-perform the Southern. But the preferred stock apears to be less risky and, when comparing its historical volatility, Nextera Energy is 1.81 times less risky than Southern. The preferred stock trades about -0.13 of its potential returns per unit of risk. The Southern Co is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 2,424 in Southern Co on August 28, 2024 and sell it today you would lose (15.00) from holding Southern Co or give up 0.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nextera Energy vs. Southern Co
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. Pacific Gas and | Nextera Energy vs. Pacific Gas and | Nextera Energy vs. Pacific Gas and | Nextera Energy vs. Pacific Gas and |
| Southern vs. AKITA Drilling | Southern vs. Transocean | Southern vs. Universal Technical Institute | Southern vs. AMREP |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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