Correlation Between Brookfield Renewable and Orsted AS

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

By analyzing existing cross correlation between Brookfield Renewable Corp and Orsted AS ADR, you can compare the effects of market volatilities on Brookfield Renewable and Orsted AS 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 Orsted AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Renewable and Orsted AS.

Diversification Opportunities for Brookfield Renewable and Orsted AS

0.84

Correlation Coefficient

Brookfield Renewable  Orsted AS

Very poor diversification

The 3 months correlation between Brookfield and Orsted is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Corp and Orsted AS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orsted AS ADR 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 Corp are associated (or correlated) with Orsted AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orsted AS ADR has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and Orsted AS go up and down completely randomly.

Pair Corralation between Brookfield Renewable and Orsted AS

Given the investment horizon of 90 days Brookfield Renewable Corp is expected to generate 0.73 times more return on investment than Orsted AS. However, Brookfield Renewable Corp is 1.36 times less risky than Orsted AS. It trades about 0.02 of its potential returns per unit of risk. Orsted AS ADR is currently generating about 0.01 per unit of risk. If you would invest  2,769  in Brookfield Renewable Corp on December 30, 2024 and sell it today you would earn a total of  27.00  from holding Brookfield Renewable Corp or generate 0.98% return on investment over 90 days.

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

Brookfield Renewable Corp  vs.  Orsted AS ADR

Brookfield Renewable Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Renewable Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Brookfield Renewable is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Orsted AS ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orsted AS ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Orsted AS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Brookfield Renewable and Orsted AS

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

The idea behind Brookfield Renewable Corp and Orsted AS ADR 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.