Correlation Between Nextera Energy and Clearway Energy

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

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

Diversification Opportunities for Nextera Energy and Clearway Energy

0.43

Correlation Coefficient

Nextera Energy  Clearway Energy

Very weak diversification

The 3 months correlation between Nextera and Clearway is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy Partners and Clearway Energy Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearway Energy Class 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 Partners are associated (or correlated) with Clearway Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearway Energy Class has no effect on the direction of Nextera Energy i.e., Nextera Energy and Clearway Energy go up and down completely randomly.

Pair Corralation between Nextera Energy and Clearway Energy

Considering the 90-day investment horizon Nextera Energy Partners is expected to under-perform the Clearway Energy. In addition to that, Nextera Energy is 1.53 times more volatile than Clearway Energy Class. It trades about -0.13 of its total potential returns per unit of risk. Clearway Energy Class is currently generating about 0.05 per unit of volatility. If you would invest  2,808  in Clearway Energy Class on September 3, 2024 and sell it today you would earn a total of  141.00  from holding Clearway Energy Class or generate 5.02% return on investment over 90 days.

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

Nextera Energy Partners  vs.  Clearway Energy Class

Nextera Energy Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextera Energy Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Clearway Energy Class

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clearway Energy Class are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Clearway Energy is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nextera Energy and Clearway Energy

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

The idea behind Nextera Energy Partners and Clearway Energy Class 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.