Correlation Between Brookfield Renewable and Brookfield Infrastructure

Can any of the company-specific risk be diversified away by investing in both Brookfield Renewable and Brookfield Infrastructure 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 Brookfield Infrastructure 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 Brookfield Infrastructure Corp, you can compare the effects of market volatilities on Brookfield Renewable and Brookfield Infrastructure 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 Brookfield Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Renewable and Brookfield Infrastructure.

Diversification Opportunities for Brookfield Renewable and Brookfield Infrastructure

0.11

Correlation Coefficient

Brookfield Renewable  Brookfield Infrastructure

Average diversification

The 3 months correlation between Brookfield and Brookfield is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Partners and Brookfield Infrastructure Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Infrastructure 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 Brookfield Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Infrastructure has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and Brookfield Infrastructure go up and down completely randomly.

Pair Corralation between Brookfield Renewable and Brookfield Infrastructure

Assuming the 90 days trading horizon Brookfield Renewable Partners is expected to under-perform the Brookfield Infrastructure. In addition to that, Brookfield Renewable is 1.6 times more volatile than Brookfield Infrastructure Corp. It trades about -0.02 of its total potential returns per unit of risk. Brookfield Infrastructure Corp is currently generating about 0.07 per unit of volatility. If you would invest  5,665  in Brookfield Infrastructure Corp on September 13, 2024 and sell it today you would earn a total of  306.00  from holding Brookfield Infrastructure Corp or generate 5.4% return on investment over 90 days.

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

Brookfield Renewable Partners  vs.  Brookfield Infrastructure Corp

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.

Brookfield Infrastructure

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Infrastructure Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Brookfield Infrastructure is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Brookfield Renewable and Brookfield Infrastructure

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

The idea behind Brookfield Renewable Partners and Brookfield Infrastructure Corp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.