Correlation Between Spire and Nextera Energy
Can any of the company-specific risk be diversified away by investing in both Spire 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 Spire and Nextera Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spire Inc and Nextera Energy Partners, you can compare the effects of market volatilities on Spire 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 Spire with a short position of Nextera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spire and Nextera Energy.
Diversification Opportunities for Spire and Nextera Energy
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Spire and Nextera is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Spire Inc 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 Spire 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 Spire Inc 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 Spire i.e., Spire and Nextera Energy go up and down completely randomly.
Pair Corralation between Spire and Nextera Energy
Allowing for the 90-day total investment horizon Spire Inc is expected to generate 0.38 times more return on investment than Nextera Energy. However, Spire Inc is 2.62 times less risky than Nextera Energy. It trades about 0.08 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 5,625 in Spire Inc on November 9, 2024 and sell it today you would earn a total of 1,602 from holding Spire Inc or generate 28.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.5% |
| Values | Daily Returns |
Spire Inc vs. Nextera Energy Partners
Performance |
| Timeline |
| Spire Inc |
| Nextera Energy Partners |
Spire and Nextera Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spire and Nextera Energy
The main advantage of trading using opposite Spire and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spire 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.| Spire vs. Northwest Natural Gas | Spire vs. Chesapeake Utilities | Spire vs. One Gas | Spire vs. NewJersey Resources |
| 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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