Correlation Between Nextera Energy and Summit Midstream
Can any of the company-specific risk be diversified away by investing in both Nextera Energy and Summit Midstream 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 Summit Midstream 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 Summit Midstream, you can compare the effects of market volatilities on Nextera Energy and Summit Midstream 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 Summit Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextera Energy and Summit Midstream.
Diversification Opportunities for Nextera Energy and Summit Midstream
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Nextera and Summit is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy Partners and Summit Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream 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 Summit Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Midstream has no effect on the direction of Nextera Energy i.e., Nextera Energy and Summit Midstream go up and down completely randomly.
Pair Corralation between Nextera Energy and Summit Midstream
Considering the 90-day investment horizon Nextera Energy Partners is expected to under-perform the Summit Midstream. But the stock apears to be less risky and, when comparing its historical volatility, Nextera Energy Partners is 1.09 times less risky than Summit Midstream. The stock trades about -0.06 of its potential returns per unit of risk. The Summit Midstream is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,876 in Summit Midstream on August 31, 2024 and sell it today you would earn a total of 1,870 from holding Summit Midstream or generate 99.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nextera Energy Partners vs. Summit Midstream
Performance |
| Timeline |
| Nextera Energy Partners |
| Summit Midstream |
Nextera Energy and Summit Midstream Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextera Energy and Summit Midstream
The main advantage of trading using opposite Nextera Energy and Summit Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextera Energy position performs unexpectedly, Summit Midstream 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 Summit Midstream will offset losses from the drop in Summit Midstream's long position.| Nextera Energy vs. Verde Clean Fuels | Nextera Energy vs. Eco Wave Power | Nextera Energy vs. Fluence Energy | Nextera Energy vs. Advent Technologies Holdings |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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