Correlation Between SNDL and Nextera Energy

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

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

Diversification Opportunities for SNDL and Nextera Energy

0.58

Correlation Coefficient

SNDL  Nextera Energy

Very weak diversification

The 3 months correlation between SNDL and Nextera is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding SNDL Inc and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and SNDL 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 SNDL Inc 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 SNDL i.e., SNDL and Nextera Energy go up and down completely randomly.

Pair Corralation between SNDL and Nextera Energy

Given the investment horizon of 90 days SNDL Inc is expected to generate 2.07 times more return on investment than Nextera Energy. However, SNDL is 2.07 times more volatile than Nextera Energy. It trades about -0.15 of its potential returns per unit of risk. Nextera Energy is currently generating about -0.37 per unit of risk. If you would invest  196.00  in SNDL Inc on September 28, 2024 and sell it today you would lose (15.00) from holding SNDL Inc or give up 7.65% of portfolio value over 90 days.

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

SNDL Inc  vs.  Nextera Energy

SNDL Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SNDL Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with SNDL and Nextera Energy

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

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.