Correlation Between Nextera Energy and Renew Energy
Can any of the company-specific risk be diversified away by investing in both Nextera Energy and Renew Energy 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 Renew Energy 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 Renew Energy Global, you can compare the effects of market volatilities on Nextera Energy and Renew Energy 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 Renew Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextera Energy and Renew Energy.
Diversification Opportunities for Nextera Energy and Renew Energy
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nextera and Renew is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy Partners and Renew Energy Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renew Energy Global 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 Renew Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renew Energy Global has no effect on the direction of Nextera Energy i.e., Nextera Energy and Renew Energy go up and down completely randomly.
Pair Corralation between Nextera Energy and Renew Energy
Considering the 90-day investment horizon Nextera Energy Partners is expected to under-perform the Renew Energy. In addition to that, Nextera Energy is 1.68 times more volatile than Renew Energy Global. It trades about -0.26 of its total potential returns per unit of risk. Renew Energy Global is currently generating about -0.03 per unit of volatility. If you would invest 629.00 in Renew Energy Global on August 30, 2024 and sell it today you would lose (24.00) from holding Renew Energy Global or give up 3.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nextera Energy Partners vs. Renew Energy Global
Performance |
| Timeline |
| Nextera Energy Partners |
| Renew Energy Global |
Nextera Energy and Renew Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextera Energy and Renew Energy
The main advantage of trading using opposite Nextera Energy and Renew Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextera Energy position performs unexpectedly, Renew Energy 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 Renew Energy will offset losses from the drop in Renew Energy'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 |
| Renew Energy vs. Energy Vault Holdings | Renew Energy vs. Fluence Energy | Renew Energy vs. Altus Power | Renew Energy 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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