Correlation Between Nextera Energy and Entergy
Can any of the company-specific risk be diversified away by investing in both Nextera Energy and Entergy 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 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, you can compare the effects of market volatilities on Nextera Energy and Entergy 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextera Energy and Entergy.
Diversification Opportunities for Nextera Energy and Entergy
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nextera and Entergy is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy and Entergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy has no effect on the direction of Nextera Energy i.e., Nextera Energy and Entergy go up and down completely randomly.
Pair Corralation between Nextera Energy and Entergy
Considering the 90-day investment horizon Nextera Energy is expected to generate 1.47 times less return on investment than Entergy. In addition to that, Nextera Energy is 1.09 times more volatile than Entergy. It trades about 0.08 of its total potential returns per unit of risk. Entergy is currently generating about 0.12 per unit of volatility. If you would invest 9,804 in Entergy on August 27, 2024 and sell it today you would earn a total of 5,302 from holding Entergy or generate 54.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nextera Energy vs. Entergy
Performance |
| Timeline |
| Nextera Energy |
| Entergy |
Nextera Energy and Entergy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextera Energy and Entergy
The main advantage of trading using opposite Nextera Energy and Entergy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextera Energy position performs unexpectedly, Entergy 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 will offset losses from the drop in Entergy's long position.| Nextera Energy vs. Dominion Energy | Nextera Energy vs. Consolidated Edison | Nextera Energy vs. Eversource Energy | Nextera Energy vs. FirstEnergy |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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