Correlation Between TFI International and Nextera Energy

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

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

Diversification Opportunities for TFI International and Nextera Energy

-0.58

Correlation Coefficient

TFI International  Nextera Energy

Excellent diversification

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

Pair Corralation between TFI International and Nextera Energy

Given the investment horizon of 90 days TFI International is expected to under-perform the Nextera Energy. In addition to that, TFI International is 1.19 times more volatile than Nextera Energy. It trades about -0.03 of its total potential returns per unit of risk. Nextera Energy is currently generating about 0.01 per unit of volatility. If you would invest  7,117  in Nextera Energy on September 21, 2024 and sell it today you would earn a total of  47.50  from holding Nextera Energy or generate 0.67% return on investment over 90 days.

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

TFI International  vs.  Nextera Energy

TFI International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TFI International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, TFI International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 inconsistent 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 TFI International and Nextera Energy

The main advantage of trading using opposite TFI International and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFI International 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 TFI International 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .