Correlation Between GE Vernova and Nextera Energy

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

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

Diversification Opportunities for GE Vernova and Nextera Energy

-0.69

Correlation Coefficient

GE Vernova  Nextera Energy

Excellent diversification

The 3 months correlation between GEV and Nextera is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding GE Vernova LLC 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 GE Vernova 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 GE Vernova LLC 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 GE Vernova i.e., GE Vernova and Nextera Energy go up and down completely randomly.

Pair Corralation between GE Vernova and Nextera Energy

Considering the 90-day investment horizon GE Vernova LLC is expected to generate 0.7 times more return on investment than Nextera Energy. However, GE Vernova LLC is 1.43 times less risky than Nextera Energy. It trades about 0.29 of its potential returns per unit of risk. Nextera Energy Partners is currently generating about -0.4 per unit of risk. If you would invest  27,272  in GE Vernova LLC on August 19, 2024 and sell it today you would earn a total of  5,704  from holding GE Vernova LLC or generate 20.92% return on investment over 90 days.

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

GE Vernova LLC  vs.  Nextera Energy Partners

GE Vernova LLC

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in GE Vernova LLC are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, GE Vernova showed solid returns over the last few months and may actually be approaching a breakup point.

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 conflicting performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with GE Vernova and Nextera Energy

The main advantage of trading using opposite GE Vernova and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Vernova 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 GE Vernova LLC 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.