Correlation Between AMREP and Nextera Energy

Can any of the company-specific risk be diversified away by investing in both AMREP 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 AMREP and Nextera Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AMREP and Nextera Energy, you can compare the effects of market volatilities on AMREP 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 AMREP with a short position of Nextera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMREP and Nextera Energy.

Diversification Opportunities for AMREP and Nextera Energy

-0.65

Correlation Coefficient

AMREP  Nextera Energy

Excellent diversification

The 3 months correlation between AMREP and Nextera is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding AMREP and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and AMREP 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 AMREP 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 AMREP i.e., AMREP and Nextera Energy go up and down completely randomly.

Pair Corralation between AMREP and Nextera Energy

Considering the 90-day investment horizon AMREP is expected to generate 2.46 times more return on investment than Nextera Energy. However, AMREP is 2.46 times more volatile than Nextera Energy. It trades about 0.01 of its potential returns per unit of risk. Nextera Energy is currently generating about -0.14 per unit of risk. If you would invest  3,030  in AMREP on September 24, 2024 and sell it today you would lose (79.00) from holding AMREP or give up 2.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

AMREP  vs.  Nextera Energy

AMREP

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days AMREP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, AMREP is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Nextera Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextera Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with AMREP and Nextera Energy

The main advantage of trading using opposite AMREP and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMREP 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.

The idea behind AMREP and Nextera Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.