Correlation Between Nextera Energy and Nordic Semiconductor

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

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

Diversification Opportunities for Nextera Energy and Nordic Semiconductor

0.08

Correlation Coefficient

Nextera Energy  Nordic Semiconductor

Significant diversification

The 3 months correlation between Nextera and Nordic is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy and Nordic Semiconductor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Semiconductor ASA 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 Nordic Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Semiconductor ASA has no effect on the direction of Nextera Energy i.e., Nextera Energy and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between Nextera Energy and Nordic Semiconductor

Considering the 90-day investment horizon Nextera Energy is expected to generate 0.4 times more return on investment than Nordic Semiconductor. However, Nextera Energy is 2.51 times less risky than Nordic Semiconductor. It trades about 0.01 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about 0.0 per unit of risk. If you would invest  7,033  in Nextera Energy on October 4, 2024 and sell it today you would earn a total of  124.50  from holding Nextera Energy or generate 1.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.73%
Values	Daily Returns

Nextera Energy  vs.  Nordic Semiconductor ASA

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.

Nordic Semiconductor ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordic Semiconductor ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Nordic Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nextera Energy and Nordic Semiconductor

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

The idea behind Nextera Energy and Nordic Semiconductor ASA 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.