Correlation Between Nextera Energy and AMREP

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

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

Diversification Opportunities for Nextera Energy and AMREP

-0.35

Correlation Coefficient

Nextera Energy  AMREP

Very good diversification

The 3 months correlation between Nextera and AMREP is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy and AMREP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMREP 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 AMREP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMREP has no effect on the direction of Nextera Energy i.e., Nextera Energy and AMREP go up and down completely randomly.

Pair Corralation between Nextera Energy and AMREP

Considering the 90-day investment horizon Nextera Energy is expected to generate 0.27 times more return on investment than AMREP. However, Nextera Energy is 3.69 times less risky than AMREP. It trades about -0.21 of its potential returns per unit of risk. AMREP is currently generating about -0.21 per unit of risk. If you would invest  7,398  in Nextera Energy on October 12, 2024 and sell it today you would lose (332.00) from holding Nextera Energy or give up 4.49% 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.  AMREP

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

AMREP

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Nextera Energy and AMREP

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

The idea behind Nextera Energy and AMREP 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.