Correlation Between Brookfield Renewable and Pembina Pipeline

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

Diversification Opportunities for Brookfield Renewable and Pembina Pipeline

0.56

Correlation Coefficient

Brookfield Renewable  Pembina Pipeline

Very weak diversification

The 3 months correlation between Brookfield and Pembina is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Partners and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and Pembina Pipeline go up and down completely randomly.

Pair Corralation between Brookfield Renewable and Pembina Pipeline

Assuming the 90 days trading horizon Brookfield Renewable Partners is expected to generate 2.46 times more return on investment than Pembina Pipeline. However, Brookfield Renewable is 2.46 times more volatile than Pembina Pipeline Corp. It trades about 0.09 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.12 per unit of risk. If you would invest  3,248  in Brookfield Renewable Partners on September 3, 2024 and sell it today you would earn a total of  389.00  from holding Brookfield Renewable Partners or generate 11.98% return on investment over 90 days.

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

Brookfield Renewable Partners  vs.  Pembina Pipeline Corp

Brookfield Renewable

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Renewable Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brookfield Renewable may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pembina Pipeline Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal essential indicators, Pembina Pipeline may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Brookfield Renewable and Pembina Pipeline

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

The idea behind Brookfield Renewable Partners and Pembina Pipeline 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..