Correlation Between Brookfield Renewable and Fluence Energy

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

Diversification Opportunities for Brookfield Renewable and Fluence Energy

0.28

Correlation Coefficient

Brookfield Renewable  Fluence Energy

Modest diversification

The 3 months correlation between Brookfield and Fluence is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Corp and Fluence Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fluence 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 Corp are associated (or correlated) with Fluence Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fluence Energy has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and Fluence Energy go up and down completely randomly.

Pair Corralation between Brookfield Renewable and Fluence Energy

Given the investment horizon of 90 days Brookfield Renewable Corp is expected to generate 0.55 times more return on investment than Fluence Energy. However, Brookfield Renewable Corp is 1.83 times less risky than Fluence Energy. It trades about 0.11 of its potential returns per unit of risk. Fluence Energy is currently generating about 0.05 per unit of risk. If you would invest  2,737  in Brookfield Renewable Corp on September 3, 2024 and sell it today you would earn a total of  455.00  from holding Brookfield Renewable Corp or generate 16.62% return on investment over 90 days.

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

Brookfield Renewable Corp  vs.  Fluence Energy

Brookfield Renewable Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Renewable Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Brookfield Renewable exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fluence Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fluence Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Fluence Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Renewable and Fluence Energy

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

The idea behind Brookfield Renewable Corp and Fluence 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .