Correlation Between Wisconsin Electric and Nextera Energy
Can any of the company-specific risk be diversified away by investing in both Wisconsin Electric 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 Wisconsin Electric and Nextera Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wisconsin Electric Power and Nextera Energy, you can compare the effects of market volatilities on Wisconsin Electric 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 Wisconsin Electric with a short position of Nextera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wisconsin Electric and Nextera Energy.
Diversification Opportunities for Wisconsin Electric and Nextera Energy
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wisconsin and Nextera is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Wisconsin Electric Power and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and Wisconsin Electric 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 Wisconsin Electric Power 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 Wisconsin Electric i.e., Wisconsin Electric and Nextera Energy go up and down completely randomly.
Pair Corralation between Wisconsin Electric and Nextera Energy
Assuming the 90 days horizon Wisconsin Electric Power is expected to generate 1.84 times more return on investment than Nextera Energy. However, Wisconsin Electric is 1.84 times more volatile than Nextera Energy. It trades about 0.04 of its potential returns per unit of risk. Nextera Energy is currently generating about -0.03 per unit of risk. If you would invest 6,730 in Wisconsin Electric Power on September 12, 2024 and sell it today you would earn a total of 70.00 from holding Wisconsin Electric Power or generate 1.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wisconsin Electric Power vs. Nextera Energy
Performance |
| Timeline |
| Wisconsin Electric Power |
| Nextera Energy |
Wisconsin Electric and Nextera Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wisconsin Electric and Nextera Energy
The main advantage of trading using opposite Wisconsin Electric and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wisconsin Electric 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.| Wisconsin Electric vs. Union Electric | Wisconsin Electric vs. Xcel Energy | Wisconsin Electric vs. Alliant Energy Corp | Wisconsin Electric vs. Entergy |
| 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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