Correlation Between Acco Brands and Nextera Energy

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

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

Diversification Opportunities for Acco Brands and Nextera Energy

-0.6

Correlation Coefficient

Acco Brands  Nextera Energy

Excellent diversification

The 3 months correlation between Acco and Nextera is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Acco Brands and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and Acco Brands 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 Acco Brands 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 has no effect on the direction of Acco Brands i.e., Acco Brands and Nextera Energy go up and down completely randomly.

Pair Corralation between Acco Brands and Nextera Energy

Given the investment horizon of 90 days Acco Brands is expected to under-perform the Nextera Energy. In addition to that, Acco Brands is 2.08 times more volatile than Nextera Energy. It trades about -0.2 of its total potential returns per unit of risk. Nextera Energy is currently generating about -0.37 per unit of volatility. If you would invest  7,867  in Nextera Energy on September 29, 2024 and sell it today you would lose (656.00) from holding Nextera Energy or give up 8.34% of portfolio value over 90 days.

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

Acco Brands  vs.  Nextera Energy

Acco Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acco Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Acco Brands is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Acco Brands and Nextera Energy

The main advantage of trading using opposite Acco Brands and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Acco Brands 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 Acco Brands and Nextera Energy 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.