Correlation Between Nextera Energy and Fossil

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

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

Diversification Opportunities for Nextera Energy and Fossil

-0.05

Correlation Coefficient

Nextera Energy  Fossil

Good diversification

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

Pair Corralation between Nextera Energy and Fossil

Assuming the 90 days trading horizon Nextera Energy is expected to generate 0.28 times more return on investment than Fossil. However, Nextera Energy is 3.63 times less risky than Fossil. It trades about -0.01 of its potential returns per unit of risk. Fossil Group is currently generating about -0.1 per unit of risk. 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

Nextera Energy  vs.  Fossil Group

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.

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.

Pair Trading with Nextera Energy and Fossil

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

The idea behind Nextera Energy and Fossil Group 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.