Correlation Between Sea and Nextera Energy

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

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

Diversification Opportunities for Sea and Nextera Energy

-0.06

Correlation Coefficient

Sea  Nextera Energy

Good diversification

The 3 months correlation between Sea and Nextera is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and Sea 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 Sea 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 Sea i.e., Sea and Nextera Energy go up and down completely randomly.

Pair Corralation between Sea and Nextera Energy

Allowing for the 90-day total investment horizon Sea is expected to generate 1.76 times more return on investment than Nextera Energy. However, Sea is 1.76 times more volatile than Nextera Energy. It trades about 0.13 of its potential returns per unit of risk. Nextera Energy is currently generating about -0.02 per unit of risk. If you would invest  10,872  in Sea on December 27, 2024 and sell it today you would earn a total of  2,491  from holding Sea or generate 22.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Sea  vs.  Nextera Energy

Sea

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Sea and Nextera Energy

The main advantage of trading using opposite Sea and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea 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 Sea 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.