Correlation Between Nextera Energy and Talen Energy
Can any of the company-specific risk be diversified away by investing in both Nextera Energy and Talen Energy 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 Talen Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nextera Energy and Talen Energy, you can compare the effects of market volatilities on Nextera Energy and Talen Energy 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 Talen Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextera Energy and Talen Energy.
Diversification Opportunities for Nextera Energy and Talen Energy
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nextera and Talen is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy and Talen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talen 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 Talen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talen Energy has no effect on the direction of Nextera Energy i.e., Nextera Energy and Talen Energy go up and down completely randomly.
Pair Corralation between Nextera Energy and Talen Energy
Considering the 90-day investment horizon Nextera Energy is expected to under-perform the Talen Energy. But the stock apears to be less risky and, when comparing its historical volatility, Nextera Energy is 2.2 times less risky than Talen Energy. The stock trades about -0.02 of its potential returns per unit of risk. The Talen Energy is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 17,000 in Talen Energy on September 4, 2024 and sell it today you would earn a total of 3,981 from holding Talen Energy or generate 23.42% 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. Talen Energy
Performance |
| Timeline |
| Nextera Energy |
| Talen Energy |
Nextera Energy and Talen Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextera Energy and Talen Energy
The main advantage of trading using opposite Nextera Energy and Talen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextera Energy position performs unexpectedly, Talen Energy 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 Talen Energy will offset losses from the drop in Talen Energy's long position.| Nextera Energy vs. Cars Inc | Nextera Energy vs. Mesa Air Group | Nextera Energy vs. Ryanair Holdings PLC | Nextera Energy vs. CarsalesCom Ltd ADR |
| Talen Energy vs. JJill Inc | Talen Energy vs. Jacobs Solutions | Talen Energy vs. Figs Inc | Talen Energy vs. Sabre Corpo |
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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