Correlation Between Nextera Energy and Northland Power
Can any of the company-specific risk be diversified away by investing in both Nextera Energy and Northland 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 Northland 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 Northland Power, you can compare the effects of market volatilities on Nextera Energy and Northland 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 Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextera Energy and Northland Power.
Diversification Opportunities for Nextera Energy and Northland Power
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nextera and Northland is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy Partners and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power 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 Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of Nextera Energy i.e., Nextera Energy and Northland Power go up and down completely randomly.
Pair Corralation between Nextera Energy and Northland Power
Considering the 90-day investment horizon Nextera Energy Partners is expected to under-perform the Northland Power. In addition to that, Nextera Energy is 3.25 times more volatile than Northland Power. It trades about -0.42 of its total potential returns per unit of risk. Northland Power is currently generating about -0.32 per unit of volatility. If you would invest 1,324 in Northland Power on November 5, 2024 and sell it today you would lose (157.00) from holding Northland Power or give up 11.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nextera Energy Partners vs. Northland Power
Performance |
| Timeline |
| Nextera Energy Partners |
| Northland Power |
Nextera Energy and Northland Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextera Energy and Northland Power
The main advantage of trading using opposite Nextera Energy and Northland Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextera Energy position performs unexpectedly, Northland 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 Northland Power will offset losses from the drop in Northland 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. Clearway Energy |
| Northland Power vs. Kontrol Technologies Corp | Northland Power vs. PwrCor Inc | Northland Power vs. 808 Renewable Energy | Northland Power vs. Boralex |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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