Correlation Between Simon Property and Nextera Energy

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

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

Diversification Opportunities for Simon Property and Nextera Energy

0.15

Correlation Coefficient

Simon Property  Nextera Energy

Average diversification

The 3 months correlation between Simon and Nextera is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and Simon Property 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 Simon Property Group 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 Simon Property i.e., Simon Property and Nextera Energy go up and down completely randomly.

Pair Corralation between Simon Property and Nextera Energy

Considering the 90-day investment horizon Simon Property Group is expected to generate 0.88 times more return on investment than Nextera Energy. However, Simon Property Group is 1.13 times less risky than Nextera Energy. It trades about 0.09 of its potential returns per unit of risk. Nextera Energy is currently generating about 0.01 per unit of risk. If you would invest  10,106  in Simon Property Group on December 2, 2024 and sell it today you would earn a total of  8,503  from holding Simon Property Group or generate 84.14% return on investment over 90 days.

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

Simon Property Group  vs.  Nextera Energy

Simon Property Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Simon Property is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 latest uncertain performance, the Preferred Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Simon Property and Nextera Energy

The main advantage of trading using opposite Simon Property and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simon Property 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 Simon Property Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.