Correlation Between Fossil and Nextera Energy

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

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

Diversification Opportunities for Fossil and Nextera Energy

-0.05

Correlation Coefficient

Fossil  Nextera Energy

Good diversification

The 3 months correlation between Fossil and Nextera is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Fossil Group and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and Fossil 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 Fossil Group 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 Fossil i.e., Fossil and Nextera Energy go up and down completely randomly.

Pair Corralation between Fossil and Nextera Energy

Given the investment horizon of 90 days Fossil Group is expected to under-perform the Nextera Energy. In addition to that, Fossil is 3.63 times more volatile than Nextera Energy. It trades about -0.1 of its total potential returns per unit of risk. Nextera Energy is currently generating about -0.01 per unit of volatility. If you would invest  4,121  in Nextera Energy on December 29, 2024 and sell it today you would lose (66.00) from holding Nextera Energy or give up 1.6% of portfolio value over 90 days.

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

Fossil Group  vs.  Nextera Energy

Fossil Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fossil Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Nextera Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nextera Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Nextera Energy is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Fossil and Nextera Energy

The main advantage of trading using opposite Fossil and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fossil 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 Fossil Group 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.