Correlation Between Q2 Holdings and Nextera Energy

Can any of the company-specific risk be diversified away by investing in both Q2 Holdings 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 Q2 Holdings and Nextera Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Q2 Holdings and Nextera Energy, you can compare the effects of market volatilities on Q2 Holdings 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 Q2 Holdings with a short position of Nextera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Q2 Holdings and Nextera Energy.

Diversification Opportunities for Q2 Holdings and Nextera Energy

-0.82

Correlation Coefficient

Q2 Holdings  Nextera Energy

Pay attention - limited upside

The 3 months correlation between QTWO and Nextera is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Q2 Holdings and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and Q2 Holdings 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 Q2 Holdings 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 Q2 Holdings i.e., Q2 Holdings and Nextera Energy go up and down completely randomly.

Pair Corralation between Q2 Holdings and Nextera Energy

Given the investment horizon of 90 days Q2 Holdings is expected to generate 1.7 times more return on investment than Nextera Energy. However, Q2 Holdings is 1.7 times more volatile than Nextera Energy. It trades about 0.1 of its potential returns per unit of risk. Nextera Energy is currently generating about 0.0 per unit of risk. If you would invest  3,073  in Q2 Holdings on October 4, 2024 and sell it today you would earn a total of  6,992  from holding Q2 Holdings or generate 227.53% return on investment over 90 days.

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

Q2 Holdings  vs.  Nextera Energy

Q2 Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Q2 Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Q2 Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Q2 Holdings and Nextera Energy

The main advantage of trading using opposite Q2 Holdings and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Q2 Holdings 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 Q2 Holdings 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.

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.