Correlation Between Nextera Energy and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both Nextera Energy and Algonquin Power 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 Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nextera Energy Partners and Algonquin Power Utilities, you can compare the effects of market volatilities on Nextera Energy and Algonquin Power 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 Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextera Energy and Algonquin Power.
Diversification Opportunities for Nextera Energy and Algonquin Power
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nextera and Algonquin is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy Partners and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities 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 Partners are associated (or correlated) with Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of Nextera Energy i.e., Nextera Energy and Algonquin Power go up and down completely randomly.
Pair Corralation between Nextera Energy and Algonquin Power
Considering the 90-day investment horizon Nextera Energy Partners is expected to under-perform the Algonquin Power. In addition to that, Nextera Energy is 2.23 times more volatile than Algonquin Power Utilities. It trades about -0.15 of its total potential returns per unit of risk. Algonquin Power Utilities is currently generating about -0.09 per unit of volatility. If you would invest 501.00 in Algonquin Power Utilities on August 28, 2024 and sell it today you would lose (16.00) from holding Algonquin Power Utilities or give up 3.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nextera Energy Partners vs. Algonquin Power Utilities
Performance |
| Timeline |
| Nextera Energy Partners |
| Algonquin Power Utilities |
Nextera Energy and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextera Energy and Algonquin Power
The main advantage of trading using opposite Nextera Energy and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextera Energy position performs unexpectedly, Algonquin Power 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 Algonquin Power will offset losses from the drop in Algonquin Power's long position.| Nextera Energy vs. Brookfield Renewable Corp | Nextera Energy vs. Algonquin Power Utilities | Nextera Energy vs. Clearway Energy Class | Nextera Energy vs. Atlantica Sustainable Infrastructure |
| Algonquin Power vs. Brookfield Renewable Corp | Algonquin Power vs. Nextera Energy Partners | Algonquin Power vs. Clearway Energy Class | Algonquin Power vs. Atlantica Sustainable Infrastructure |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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