Correlation Between NSTAR Electric and Nextera Energy
Can any of the company-specific risk be diversified away by investing in both NSTAR 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 NSTAR 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 NSTAR Electric and Nextera Energy, you can compare the effects of market volatilities on NSTAR 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 NSTAR Electric with a short position of Nextera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NSTAR Electric and Nextera Energy.
Diversification Opportunities for NSTAR Electric and Nextera Energy
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NSTAR and Nextera is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding NSTAR Electric and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and NSTAR 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 NSTAR Electric 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 NSTAR Electric i.e., NSTAR Electric and Nextera Energy go up and down completely randomly.
Pair Corralation between NSTAR Electric and Nextera Energy
Assuming the 90 days horizon NSTAR Electric is expected to generate 0.51 times more return on investment than Nextera Energy. However, NSTAR Electric is 1.96 times less risky than Nextera Energy. It trades about 0.13 of its potential returns per unit of risk. Nextera Energy is currently generating about -0.16 per unit of risk. If you would invest 6,900 in NSTAR Electric on April 4, 2024 and sell it today you would earn a total of 150.00 from holding NSTAR Electric or generate 2.17% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
NSTAR Electric vs. Nextera Energy
Performance |
Timeline |
NSTAR Electric |
Nextera Energy |
NSTAR Electric and Nextera Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NSTAR Electric and Nextera Energy
The main advantage of trading using opposite NSTAR Electric and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NSTAR 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.NSTAR Electric vs. Grom Social Enterprises | NSTAR Electric vs. Freedom Internet Group | NSTAR Electric vs. Iridium Communications | NSTAR Electric vs. Radcom |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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