Correlation Between Nextera Energy and Alliant Energy

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

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

Diversification Opportunities for Nextera Energy and Alliant Energy

-0.08

Correlation Coefficient

Nextera Energy  Alliant Energy

Good diversification

The 3 months correlation between Nextera and Alliant is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy and Alliant Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliant Energy Corp 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 Alliant Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliant Energy Corp has no effect on the direction of Nextera Energy i.e., Nextera Energy and Alliant Energy go up and down completely randomly.

Pair Corralation between Nextera Energy and Alliant Energy

Considering the 90-day investment horizon Nextera Energy is expected to under-perform the Alliant Energy. In addition to that, Nextera Energy is 1.25 times more volatile than Alliant Energy Corp. It trades about -0.13 of its total potential returns per unit of risk. Alliant Energy Corp is currently generating about 0.01 per unit of volatility. If you would invest  6,002  in Alliant Energy Corp on September 16, 2024 and sell it today you would earn a total of  43.00  from holding Alliant Energy Corp or generate 0.72% return on investment over 90 days.

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

Nextera Energy  vs.  Alliant Energy Corp

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.

Alliant Energy Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alliant Energy Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Alliant Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nextera Energy and Alliant Energy

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

The idea behind Nextera Energy and Alliant Energy Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.