Correlation Between Nextera Energy and Exelon

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

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

Diversification Opportunities for Nextera Energy and Exelon

0.91

Correlation Coefficient

Nextera Energy  Exelon

Almost no diversification

The 3 months correlation between Nextera and Exelon is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy and Exelon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exelon 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 Exelon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exelon has no effect on the direction of Nextera Energy i.e., Nextera Energy and Exelon go up and down completely randomly.

Pair Corralation between Nextera Energy and Exelon

Considering the 90-day investment horizon Nextera Energy is expected to under-perform the Exelon. In addition to that, Nextera Energy is 1.35 times more volatile than Exelon. It trades about 0.0 of its total potential returns per unit of risk. Exelon is currently generating about 0.01 per unit of volatility. If you would invest  3,728  in Exelon on September 28, 2024 and sell it today you would earn a total of  15.00  from holding Exelon or generate 0.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Nextera Energy  vs.  Exelon

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.

Exelon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exelon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Nextera Energy and Exelon

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

The idea behind Nextera Energy and Exelon 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 Commodity Directory module to find actively traded commodities issued by global exchanges.