Correlation Between Nextera Energy and Fortum Oyj
Can any of the company-specific risk be diversified away by investing in both Nextera Energy and Fortum Oyj 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 Fortum Oyj 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 Fortum Oyj ADR, you can compare the effects of market volatilities on Nextera Energy and Fortum Oyj 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 Fortum Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextera Energy and Fortum Oyj.
Diversification Opportunities for Nextera Energy and Fortum Oyj
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nextera and Fortum is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy Partners and Fortum Oyj ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj ADR 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 Fortum Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortum Oyj ADR has no effect on the direction of Nextera Energy i.e., Nextera Energy and Fortum Oyj go up and down completely randomly.
Pair Corralation between Nextera Energy and Fortum Oyj
Considering the 90-day investment horizon Nextera Energy Partners is expected to under-perform the Fortum Oyj. In addition to that, Nextera Energy is 2.41 times more volatile than Fortum Oyj ADR. It trades about -0.41 of its total potential returns per unit of risk. Fortum Oyj ADR is currently generating about 0.03 per unit of volatility. If you would invest 287.00 in Fortum Oyj ADR on November 4, 2024 and sell it today you would earn a total of 2.00 from holding Fortum Oyj ADR or generate 0.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nextera Energy Partners vs. Fortum Oyj ADR
Performance |
| Timeline |
| Nextera Energy Partners |
| Fortum Oyj ADR |
Nextera Energy and Fortum Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextera Energy and Fortum Oyj
The main advantage of trading using opposite Nextera Energy and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextera Energy position performs unexpectedly, Fortum Oyj 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 Fortum Oyj will offset losses from the drop in Fortum Oyj's long position.| Nextera Energy vs. Brookfield Renewable Corp | Nextera Energy vs. Algonquin Power Utilities | Nextera Energy vs. Clearway Energy Class | Nextera Energy vs. Clearway Energy |
| Fortum Oyj vs. Constellation Energy Corp | Fortum Oyj vs. Astra Energy | Fortum Oyj vs. Powertap Hydrogen Capital | Fortum Oyj vs. Brenmiller Energy Ltd |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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