Correlation Between Verde Clean and Nextera Energy

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

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

Diversification Opportunities for Verde Clean and Nextera Energy

-0.19

Correlation Coefficient

Verde Clean  Nextera Energy

Good diversification

The 3 months correlation between Verde and Nextera is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Verde Clean Fuels and Nextera Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy Partners and Verde Clean 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 Verde Clean Fuels 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 Partners has no effect on the direction of Verde Clean i.e., Verde Clean and Nextera Energy go up and down completely randomly.

Pair Corralation between Verde Clean and Nextera Energy

Given the investment horizon of 90 days Verde Clean Fuels is expected to generate 0.95 times more return on investment than Nextera Energy. However, Verde Clean Fuels is 1.05 times less risky than Nextera Energy. It trades about 0.01 of its potential returns per unit of risk. Nextera Energy Partners is currently generating about -0.12 per unit of risk. If you would invest  372.00  in Verde Clean Fuels on September 18, 2024 and sell it today you would lose (2.00) from holding Verde Clean Fuels or give up 0.54% of portfolio value over 90 days.

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

Verde Clean Fuels  vs.  Nextera Energy Partners

Verde Clean Fuels

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Verde Clean Fuels are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Verde Clean is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Nextera Energy Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextera Energy Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Verde Clean and Nextera Energy

The main advantage of trading using opposite Verde Clean and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verde Clean 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 Verde Clean Fuels and Nextera Energy Partners 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.