Correlation Between Nextera Energy and ENEL Societa
Can any of the company-specific risk be diversified away by investing in both Nextera Energy and ENEL Societa 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 ENEL Societa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nextera Energy and ENEL Societa per, you can compare the effects of market volatilities on Nextera Energy and ENEL Societa 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 ENEL Societa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextera Energy and ENEL Societa.
Diversification Opportunities for Nextera Energy and ENEL Societa
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nextera and ENEL is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy and ENEL Societa per in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENEL Societa per 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 ENEL Societa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENEL Societa per has no effect on the direction of Nextera Energy i.e., Nextera Energy and ENEL Societa go up and down completely randomly.
Pair Corralation between Nextera Energy and ENEL Societa
Assuming the 90 days trading horizon Nextera Energy is expected to generate 1.1 times more return on investment than ENEL Societa. However, Nextera Energy is 1.1 times more volatile than ENEL Societa per. It trades about 0.07 of its potential returns per unit of risk. ENEL Societa per is currently generating about 0.03 per unit of risk. If you would invest 3,464 in Nextera Energy on September 2, 2024 and sell it today you would earn a total of 877.00 from holding Nextera Energy or generate 25.32% 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. ENEL Societa per
Performance |
| Timeline |
| Nextera Energy |
| ENEL Societa per |
Nextera Energy and ENEL Societa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextera Energy and ENEL Societa
The main advantage of trading using opposite Nextera Energy and ENEL Societa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextera Energy position performs unexpectedly, ENEL Societa 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 ENEL Societa will offset losses from the drop in ENEL Societa's long position.| Nextera Energy vs. Duke Energy | Nextera Energy vs. PGE Corp | Nextera Energy vs. Southern Company | Nextera Energy vs. Centrais Eltricas Brasileiras |
| ENEL Societa vs. Nextera Energy | ENEL Societa vs. Consumers Energy | ENEL Societa vs. Duke Energy | ENEL Societa vs. Centrais Electricas Brasileiras |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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