Correlation Between Brookfield Renewable and Renew Energy

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

Diversification Opportunities for Brookfield Renewable and Renew Energy

-0.31

Correlation Coefficient

Brookfield Renewable  Renew Energy

Very good diversification

The 3 months correlation between Brookfield and Renew is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Partners and Renew Energy Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renew Energy Global 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 Renew Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renew Energy Global has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and Renew Energy go up and down completely randomly.

Pair Corralation between Brookfield Renewable and Renew Energy

Considering the 90-day investment horizon Brookfield Renewable Partners is expected to generate 1.13 times more return on investment than Renew Energy. However, Brookfield Renewable is 1.13 times more volatile than Renew Energy Global. It trades about 0.0 of its potential returns per unit of risk. Renew Energy Global is currently generating about -0.11 per unit of risk. If you would invest  2,257  in Brookfield Renewable Partners on December 29, 2024 and sell it today you would lose (17.00) from holding Brookfield Renewable Partners or give up 0.75% of portfolio value over 90 days.

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

Brookfield Renewable Partners  vs.  Renew Energy Global

Brookfield Renewable

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Renewable Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Brookfield Renewable is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Renew Energy Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Renew Energy Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Brookfield Renewable and Renew Energy

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

The idea behind Brookfield Renewable Partners and Renew Energy Global 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 Global Correlations module to find global opportunities by holding instruments from different markets.