Correlation Between Nextera Energy and Cementos Pacasmayo

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

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

Diversification Opportunities for Nextera Energy and Cementos Pacasmayo

-0.89

Correlation Coefficient

Nextera Energy  Cementos Pacasmayo

Pay attention - limited upside

The 3 months correlation between Nextera and Cementos is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy and Cementos Pacasmayo SAA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cementos Pacasmayo SAA and Nextera Energy 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 Nextera Energy are associated (or correlated) with Cementos Pacasmayo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cementos Pacasmayo SAA has no effect on the direction of Nextera Energy i.e., Nextera Energy and Cementos Pacasmayo go up and down completely randomly.

Pair Corralation between Nextera Energy and Cementos Pacasmayo

Considering the 90-day investment horizon Nextera Energy is expected to under-perform the Cementos Pacasmayo. But the stock apears to be less risky and, when comparing its historical volatility, Nextera Energy is 1.02 times less risky than Cementos Pacasmayo. The stock trades about -0.12 of its potential returns per unit of risk. The Cementos Pacasmayo SAA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  511.00  in Cementos Pacasmayo SAA on September 14, 2024 and sell it today you would earn a total of  84.00  from holding Cementos Pacasmayo SAA or generate 16.44% return on investment over 90 days.

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

Nextera Energy  vs.  Cementos Pacasmayo SAA

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.

Cementos Pacasmayo SAA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cementos Pacasmayo SAA are ranked lower than 12 (%) 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.

Pair Trading with Nextera Energy and Cementos Pacasmayo

The main advantage of trading using opposite Nextera Energy and Cementos Pacasmayo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextera Energy position performs unexpectedly, Cementos Pacasmayo 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 Cementos Pacasmayo will offset losses from the drop in Cementos Pacasmayo's long position.

The idea behind Nextera Energy and Cementos Pacasmayo SAA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.