Correlation Between Cementos Pacasmayo and Nextera Energy

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

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

Diversification Opportunities for Cementos Pacasmayo and Nextera Energy

-0.89

Correlation Coefficient

Cementos Pacasmayo  Nextera Energy

Pay attention - limited upside

The 3 months correlation between Cementos and Nextera is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Cementos Pacasmayo SAA and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and Cementos Pacasmayo 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 Cementos Pacasmayo SAA 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 Cementos Pacasmayo i.e., Cementos Pacasmayo and Nextera Energy go up and down completely randomly.

Pair Corralation between Cementos Pacasmayo and Nextera Energy

Given the investment horizon of 90 days Cementos Pacasmayo is expected to generate 1.05 times less return on investment than Nextera Energy. In addition to that, Cementos Pacasmayo is 1.11 times more volatile than Nextera Energy. It trades about 0.06 of its total potential returns per unit of risk. Nextera Energy is currently generating about 0.08 per unit of volatility. If you would invest  5,527  in Nextera Energy on September 14, 2024 and sell it today you would earn a total of  1,835  from holding Nextera Energy or generate 33.2% return on investment over 90 days.

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

Cementos Pacasmayo SAA  vs.  Nextera Energy

Cementos Pacasmayo SAA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cementos Pacasmayo SAA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Cementos Pacasmayo exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Cementos Pacasmayo and Nextera Energy

The main advantage of trading using opposite Cementos Pacasmayo and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cementos Pacasmayo 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 Cementos Pacasmayo SAA 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.