Correlation Between Nextera Energy and Entergy Texas
Can any of the company-specific risk be diversified away by investing in both Nextera Energy and Entergy Texas 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 Entergy Texas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nextera Energy and Entergy Texas, you can compare the effects of market volatilities on Nextera Energy and Entergy Texas 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 Entergy Texas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextera Energy and Entergy Texas.
Diversification Opportunities for Nextera Energy and Entergy Texas
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nextera and Entergy is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy and Entergy Texas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy Texas 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 Entergy Texas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy Texas has no effect on the direction of Nextera Energy i.e., Nextera Energy and Entergy Texas go up and down completely randomly.
Pair Corralation between Nextera Energy and Entergy Texas
Assuming the 90 days trading horizon Nextera Energy is expected to generate 1.91 times more return on investment than Entergy Texas. However, Nextera Energy is 1.91 times more volatile than Entergy Texas. It trades about 0.05 of its potential returns per unit of risk. Entergy Texas is currently generating about 0.04 per unit of risk. If you would invest 3,477 in Nextera Energy on November 9, 2024 and sell it today you would earn a total of 569.00 from holding Nextera Energy or generate 16.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nextera Energy vs. Entergy Texas
Performance |
| Timeline |
| Nextera Energy |
| Entergy Texas |
Nextera Energy and Entergy Texas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextera Energy and Entergy Texas
The main advantage of trading using opposite Nextera Energy and Entergy Texas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextera Energy position performs unexpectedly, Entergy Texas 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 Entergy Texas will offset losses from the drop in Entergy Texas' long position.| Nextera Energy vs. Eldorado Gold Corp | Nextera Energy vs. Marimaca Copper Corp | Nextera Energy vs. Mangazeya Mining | Nextera Energy vs. Summit Hotel Properties |
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 CEOs Directory module to screen CEOs from public companies around the world.
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