Correlation Between Mattel and Nextera Energy

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

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

Diversification Opportunities for Mattel and Nextera Energy

0.0

Correlation Coefficient

Mattel  Nextera Energy

Pay attention - limited upside

The 3 months correlation between Mattel and Nextera is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mattel Inc and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and Mattel 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 Mattel 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 has no effect on the direction of Mattel i.e., Mattel and Nextera Energy go up and down completely randomly.

Pair Corralation between Mattel and Nextera Energy

Considering the 90-day investment horizon Mattel Inc is expected to under-perform the Nextera Energy. In addition to that, Mattel is 1.27 times more volatile than Nextera Energy. It trades about 0.0 of its total potential returns per unit of risk. Nextera Energy is currently generating about 0.06 per unit of volatility. If you would invest  5,851  in Nextera Energy on September 20, 2024 and sell it today you would earn a total of  1,376  from holding Nextera Energy or generate 23.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Mattel Inc  vs.  Nextera Energy

Mattel Inc

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Mattel Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mattel is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private 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 latest weak 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 Mattel and Nextera Energy

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

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.