Correlation Between Nextera Energy and Innergex Renewable

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Can any of the company-specific risk be diversified away by investing in both Nextera Energy and Innergex Renewable 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 Innergex Renewable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nextera Energy and Innergex Renewable Energy, you can compare the effects of market volatilities on Nextera Energy and Innergex Renewable 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 Innergex Renewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextera Energy and Innergex Renewable.

Diversification Opportunities for Nextera Energy and Innergex Renewable

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Nextera and Innergex is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy and Innergex Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innergex Renewable Energy 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 Innergex Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innergex Renewable Energy has no effect on the direction of Nextera Energy i.e., Nextera Energy and Innergex Renewable go up and down completely randomly.

Pair Corralation between Nextera Energy and Innergex Renewable

Assuming the 90 days trading horizon Nextera Energy is expected to generate 0.48 times more return on investment than Innergex Renewable. However, Nextera Energy is 2.06 times less risky than Innergex Renewable. It trades about 0.02 of its potential returns per unit of risk. Innergex Renewable Energy is currently generating about -0.02 per unit of risk. If you would invest  4,098  in Nextera Energy on August 31, 2024 and sell it today you would earn a total of  243.00  from holding Nextera Energy or generate 5.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy97.33%
ValuesDaily Returns

Nextera Energy  vs.  Innergex Renewable Energy

 Performance 
       Timeline  
Nextera Energy 

Risk-Adjusted Performance

0 of 100

 
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Strong
Very Weak
Over the last 90 days Nextera Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Nextera Energy is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.
Innergex Renewable Energy 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Innergex Renewable Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Innergex Renewable is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Nextera Energy and Innergex Renewable Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nextera Energy and Innergex Renewable

The main advantage of trading using opposite Nextera Energy and Innergex Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextera Energy position performs unexpectedly, Innergex Renewable 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 Innergex Renewable will offset losses from the drop in Innergex Renewable's long position.
The idea behind Nextera Energy and Innergex Renewable 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.
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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