Correlation Between NiSource and Nextera Energy
Can any of the company-specific risk be diversified away by investing in both NiSource and Nextera 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 NiSource and Nextera Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NiSource and Nextera Energy Partners, you can compare the effects of market volatilities on NiSource and Nextera 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 NiSource with a short position of Nextera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NiSource and Nextera Energy.
Diversification Opportunities for NiSource and Nextera Energy
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NiSource and Nextera is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Nextera Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy Partners and NiSource 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 NiSource are associated (or correlated) with Nextera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextera Energy Partners has no effect on the direction of NiSource i.e., NiSource and Nextera Energy go up and down completely randomly.
Pair Corralation between NiSource and Nextera Energy
Allowing for the 90-day total investment horizon NiSource is expected to generate 0.3 times more return on investment than Nextera Energy. However, NiSource is 3.31 times less risky than Nextera Energy. It trades about 0.16 of its potential returns per unit of risk. Nextera Energy Partners is currently generating about -0.07 per unit of risk. If you would invest 2,517 in NiSource on November 9, 2024 and sell it today you would earn a total of 1,302 from holding NiSource or generate 51.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.5% |
| Values | Daily Returns |
NiSource vs. Nextera Energy Partners
Performance |
| Timeline |
| NiSource |
| Nextera Energy Partners |
NiSource and Nextera Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NiSource and Nextera Energy
The main advantage of trading using opposite NiSource and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NiSource position performs unexpectedly, Nextera 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 Nextera Energy will offset losses from the drop in Nextera Energy's long position.| NiSource vs. NewJersey Resources | NiSource vs. Northwest Natural Gas | NiSource vs. UGI Corporation | NiSource vs. Spire Inc |
| Nextera Energy vs. Brookfield Renewable Corp | Nextera Energy vs. Algonquin Power Utilities | Nextera Energy vs. Clearway Energy Class | Nextera Energy vs. Clearway 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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