Correlation Between NYSE Composite and Nextera Energy
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Nextera Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Nextera Energy, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Nextera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Nextera Energy.
Diversification Opportunities for NYSE Composite and Nextera Energy
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and Nextera is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and NYSE Composite 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 NYSE Composite 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 has no effect on the direction of NYSE Composite i.e., NYSE Composite and Nextera Energy go up and down completely randomly.
Pair Corralation between NYSE Composite and Nextera Energy
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.1 times more return on investment than Nextera Energy. However, NYSE Composite is 1.1 times more volatile than Nextera Energy. It trades about 0.14 of its potential returns per unit of risk. Nextera Energy is currently generating about 0.04 per unit of risk. If you would invest 1,613,685 in NYSE Composite on September 2, 2024 and sell it today you would earn a total of 413,519 from holding NYSE Composite or generate 25.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Nextera Energy
Performance |
| Timeline |
NYSE Composite and Nextera Energy Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Nextera Energy
Pair trading matchups for Nextera Energy
Pair Trading with NYSE Composite and Nextera Energy
The main advantage of trading using opposite NYSE Composite and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Simon Property Group | NYSE Composite vs. Merit Medical Systems | NYSE Composite vs. Catalent | NYSE Composite vs. Titan Machinery |
| Nextera Energy vs. Pacific Gas and | Nextera Energy vs. Pacific Gas and | Nextera Energy vs. Pacific Gas and | Nextera Energy vs. Pacific Gas and |
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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