Correlation Between Nextera Energy and First National
Can any of the company-specific risk be diversified away by investing in both Nextera Energy and First National 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 First National 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 First National Energy, you can compare the effects of market volatilities on Nextera Energy and First National 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 First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextera Energy and First National.
Diversification Opportunities for Nextera Energy and First National
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nextera and First is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy Partners and First National Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National 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 Partners are associated (or correlated) with First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Energy has no effect on the direction of Nextera Energy i.e., Nextera Energy and First National go up and down completely randomly.
Pair Corralation between Nextera Energy and First National
Considering the 90-day investment horizon Nextera Energy Partners is expected to under-perform the First National. But the stock apears to be less risky and, when comparing its historical volatility, Nextera Energy Partners is 5.98 times less risky than First National. The stock trades about -0.15 of its potential returns per unit of risk. The First National Energy is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 4.71 in First National Energy on August 28, 2024 and sell it today you would earn a total of 4.35 from holding First National Energy or generate 92.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nextera Energy Partners vs. First National Energy
Performance |
| Timeline |
| Nextera Energy Partners |
| First National Energy |
Nextera Energy and First National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextera Energy and First National
The main advantage of trading using opposite Nextera Energy and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextera Energy position performs unexpectedly, First National 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 First National will offset losses from the drop in First National'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 |
| First National vs. TransAlta Corp | First National vs. Pampa Energia SA | First National vs. Vistra Energy Corp | First National vs. NRG Energy |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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