Correlation Between NextEra Energy and Southern

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

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

Diversification Opportunities for NextEra Energy and Southern

-0.32

Correlation Coefficient

NextEra Energy  Southern

Very good diversification

The 3 months correlation between NextEra and Southern is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding NextEra Energy and The Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and NextEra Energy 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 NextEra Energy are associated (or correlated) with Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of NextEra Energy i.e., NextEra Energy and Southern go up and down completely randomly.

Pair Corralation between NextEra Energy and Southern

Assuming the 90 days horizon NextEra Energy is expected to generate 2.18 times more return on investment than Southern. However, NextEra Energy is 2.18 times more volatile than The Southern. It trades about 0.08 of its potential returns per unit of risk. The Southern is currently generating about 0.0 per unit of risk. If you would invest  5,952  in NextEra Energy on April 23, 2025 and sell it today you would earn a total of  610.00  from holding NextEra Energy or generate 10.25% return on investment over 90 days.

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

NextEra Energy  vs.  The Southern

NextEra Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NextEra Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NextEra Energy may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Southern

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Southern has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Southern is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NextEra Energy and Southern

The main advantage of trading using opposite NextEra Energy and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextEra Energy position performs unexpectedly, Southern 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 Southern will offset losses from the drop in Southern's long position.

The idea behind NextEra Energy and The Southern 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.