Correlation Between Visa and Nextera Energy
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Nextera Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Nextera Energy, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Nextera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Nextera Energy.
Diversification Opportunities for Visa and Nextera Energy
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Visa and Nextera is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy and Visa 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 Visa Class A 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 Visa i.e., Visa and Nextera Energy go up and down completely randomly.
Pair Corralation between Visa and Nextera Energy
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.22 times more return on investment than Nextera Energy. However, Visa is 1.22 times more volatile than Nextera Energy. It trades about 0.25 of its potential returns per unit of risk. Nextera Energy is currently generating about -0.05 per unit of risk. If you would invest 31,612 in Visa Class A on December 1, 2024 and sell it today you would earn a total of 4,659 from holding Visa Class A or generate 14.74% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Visa Class A vs. Nextera Energy
Performance |
Timeline |
Visa Class A |
Nextera Energy |
Visa and Nextera Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Nextera Energy
The main advantage of trading using opposite Visa and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
Nextera Energy vs. Duke Energy Corp | Nextera Energy vs. Southern Co | Nextera Energy vs. National Rural Utilities | Nextera Energy vs. CMS Energy Corp |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
Other Complementary Tools
Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
FinTech Suite Use AI to screen and filter profitable investment opportunities | |
Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |