Correlation Between Nextera Energy and EDP Renovaveis
Can any of the company-specific risk be diversified away by investing in both Nextera Energy and EDP Renovaveis 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 EDP Renovaveis 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 EDP Renovaveis, you can compare the effects of market volatilities on Nextera Energy and EDP Renovaveis 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 EDP Renovaveis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextera Energy and EDP Renovaveis.
Diversification Opportunities for Nextera Energy and EDP Renovaveis
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Nextera and EDP is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy Partners and EDP Renovaveis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Renovaveis 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 EDP Renovaveis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Renovaveis has no effect on the direction of Nextera Energy i.e., Nextera Energy and EDP Renovaveis go up and down completely randomly.
Pair Corralation between Nextera Energy and EDP Renovaveis
Considering the 90-day investment horizon Nextera Energy Partners is expected to generate 1.11 times more return on investment than EDP Renovaveis. However, Nextera Energy is 1.11 times more volatile than EDP Renovaveis. It trades about -0.15 of its potential returns per unit of risk. EDP Renovaveis is currently generating about -0.31 per unit of risk. If you would invest 1,949 in Nextera Energy Partners on August 28, 2024 and sell it today you would lose (221.00) from holding Nextera Energy Partners or give up 11.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Nextera Energy Partners vs. EDP Renovaveis
Performance |
| Timeline |
| Nextera Energy Partners |
| EDP Renovaveis |
Nextera Energy and EDP Renovaveis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextera Energy and EDP Renovaveis
The main advantage of trading using opposite Nextera Energy and EDP Renovaveis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextera Energy position performs unexpectedly, EDP Renovaveis 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 EDP Renovaveis will offset losses from the drop in EDP Renovaveis' 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 |
| EDP Renovaveis vs. Brookfield Renewable Partners | EDP Renovaveis vs. Clearway Energy Class | EDP Renovaveis vs. Atlantica Sustainable Infrastructure | EDP Renovaveis vs. Nextera Energy Partners |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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