Correlation Between Nextera Energy and IDACORP

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

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

Diversification Opportunities for Nextera Energy and IDACORP

-0.8

Correlation Coefficient

Nextera Energy  IDACORP

Pay attention - limited upside

The 3 months correlation between Nextera and IDACORP is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy and IDACORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDACORP 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 IDACORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDACORP has no effect on the direction of Nextera Energy i.e., Nextera Energy and IDACORP go up and down completely randomly.

Pair Corralation between Nextera Energy and IDACORP

Considering the 90-day investment horizon Nextera Energy is expected to under-perform the IDACORP. In addition to that, Nextera Energy is 1.52 times more volatile than IDACORP. It trades about -0.13 of its total potential returns per unit of risk. IDACORP is currently generating about 0.14 per unit of volatility. If you would invest  10,365  in IDACORP on September 16, 2024 and sell it today you would earn a total of  941.00  from holding IDACORP or generate 9.08% 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.  IDACORP

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 uncertain 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.

IDACORP

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IDACORP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, IDACORP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nextera Energy and IDACORP

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

The idea behind Nextera Energy and IDACORP 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.