Correlation Between TransAlta Renewables and Nextera Energy

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

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

Diversification Opportunities for TransAlta Renewables and Nextera Energy

-0.05

Correlation Coefficient

TransAlta Renewables  Nextera Energy

Good diversification

The 3 months correlation between TransAlta and Nextera is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding TransAlta Renewables and Nextera Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy Partners and TransAlta Renewables 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 TransAlta Renewables are associated (or correlated) with Nextera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextera Energy Partners has no effect on the direction of TransAlta Renewables i.e., TransAlta Renewables and Nextera Energy go up and down completely randomly.

Pair Corralation between TransAlta Renewables and Nextera Energy

If you would invest  1,020  in TransAlta Renewables on September 3, 2024 and sell it today you would earn a total of  0.00  from holding TransAlta Renewables or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

TransAlta Renewables  vs.  Nextera Energy Partners

TransAlta Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TransAlta Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TransAlta Renewables is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with TransAlta Renewables and Nextera Energy

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

The idea behind TransAlta Renewables and Nextera Energy Partners 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.