Correlation Between Brookfield Renewable and Cheniere Energy

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

Diversification Opportunities for Brookfield Renewable and Cheniere Energy

-0.42

Correlation Coefficient

Brookfield Renewable  Cheniere Energy

Very good diversification

The 3 months correlation between Brookfield and Cheniere is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Corp and Cheniere Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere 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 Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and Cheniere Energy go up and down completely randomly.

Pair Corralation between Brookfield Renewable and Cheniere Energy

Given the investment horizon of 90 days Brookfield Renewable Corp is expected to under-perform the Cheniere Energy. But the stock apears to be less risky and, when comparing its historical volatility, Brookfield Renewable Corp is 1.03 times less risky than Cheniere Energy. The stock trades about -0.09 of its potential returns per unit of risk. The Cheniere Energy is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  22,401  in Cheniere Energy on November 29, 2024 and sell it today you would lose (502.00) from holding Cheniere Energy or give up 2.24% of portfolio value over 90 days.

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

Brookfield Renewable Corp  vs.  Cheniere Energy

Brookfield Renewable Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Renewable Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Cheniere Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cheniere Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cheniere Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Brookfield Renewable and Cheniere Energy

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

The idea behind Brookfield Renewable Corp and Cheniere 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.