Correlation Between Brookfield Renewable and DTE Energy

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

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

Diversification Opportunities for Brookfield Renewable and DTE Energy

0.66

Correlation Coefficient

Brookfield Renewable  DTE Energy

Poor diversification

The 3 months correlation between Brookfield and DTE is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Partners and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Brookfield Renewable 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 Brookfield Renewable Partners are associated (or correlated) with DTE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTE Energy has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and DTE Energy go up and down completely randomly.

Pair Corralation between Brookfield Renewable and DTE Energy

Assuming the 90 days trading horizon Brookfield Renewable Partners is expected to generate 1.59 times more return on investment than DTE Energy. However, Brookfield Renewable is 1.59 times more volatile than DTE Energy. It trades about -0.01 of its potential returns per unit of risk. DTE Energy is currently generating about -0.06 per unit of risk. If you would invest  1,962  in Brookfield Renewable Partners on August 31, 2024 and sell it today you would lose (39.00) from holding Brookfield Renewable Partners or give up 1.99% of portfolio value over 90 days.

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

Brookfield Renewable Partners  vs.  DTE Energy

Brookfield Renewable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookfield Renewable Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Brookfield Renewable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

DTE Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Brookfield Renewable and DTE Energy

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

The idea behind Brookfield Renewable Partners and DTE 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.