Correlation Between Nextera Energy and Marine Products

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

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

Diversification Opportunities for Nextera Energy and Marine Products

-0.52

Correlation Coefficient

Nextera Energy  Marine Products

Excellent diversification

The 3 months correlation between Nextera and Marine is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy and Marine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Products 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 Marine Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Products has no effect on the direction of Nextera Energy i.e., Nextera Energy and Marine Products go up and down completely randomly.

Pair Corralation between Nextera Energy and Marine Products

Considering the 90-day investment horizon Nextera Energy is expected to under-perform the Marine Products. But the stock apears to be less risky and, when comparing its historical volatility, Nextera Energy is 1.82 times less risky than Marine Products. The stock trades about -0.31 of its potential returns per unit of risk. The Marine Products is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  969.00  in Marine Products on September 20, 2024 and sell it today you would lose (19.00) from holding Marine Products or give up 1.96% of portfolio value over 90 days.

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

Nextera Energy  vs.  Marine Products

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.

Marine Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marine Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Marine Products is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nextera Energy and Marine Products

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

The idea behind Nextera Energy and Marine Products 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.