Correlation Between Nuscale Power and Vestas Wind

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

By analyzing existing cross correlation between Nuscale Power Corp and Vestas Wind Systems, you can compare the effects of market volatilities on Nuscale Power and Vestas Wind 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 Nuscale Power with a short position of Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuscale Power and Vestas Wind.

Diversification Opportunities for Nuscale Power and Vestas Wind

-0.94

Correlation Coefficient

Nuscale Power  Vestas Wind

Pay attention - limited upside

The 3 months correlation between Nuscale and Vestas is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Nuscale Power Corp and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems and Nuscale Power 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 Nuscale Power Corp are associated (or correlated) with Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Nuscale Power i.e., Nuscale Power and Vestas Wind go up and down completely randomly.

Pair Corralation between Nuscale Power and Vestas Wind

Considering the 90-day investment horizon Nuscale Power Corp is expected to generate 2.58 times more return on investment than Vestas Wind. However, Nuscale Power is 2.58 times more volatile than Vestas Wind Systems. It trades about 0.3 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.2 per unit of risk. If you would invest  759.00  in Nuscale Power Corp on September 1, 2024 and sell it today you would earn a total of  2,206  from holding Nuscale Power Corp or generate 290.65% return on investment over 90 days.

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

Nuscale Power Corp  vs.  Vestas Wind Systems

Nuscale Power Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nuscale Power Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent primary indicators, Nuscale Power reported solid returns over the last few months and may actually be approaching a breakup point.

Vestas Wind Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestas Wind Systems 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 basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Nuscale Power and Vestas Wind

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

The idea behind Nuscale Power Corp and Vestas Wind Systems 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.