Correlation Between Brookfield Renewable and Tokyo Electric

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

Diversification Opportunities for Brookfield Renewable and Tokyo Electric

-0.04

Correlation Coefficient

Brookfield Renewable  Tokyo Electric

Good diversification

The 3 months correlation between Brookfield and Tokyo is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Corp and Tokyo Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electric Power 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 Tokyo Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Electric Power has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and Tokyo Electric go up and down completely randomly.

Pair Corralation between Brookfield Renewable and Tokyo Electric

Given the investment horizon of 90 days Brookfield Renewable Corp is expected to generate 0.28 times more return on investment than Tokyo Electric. However, Brookfield Renewable Corp is 3.61 times less risky than Tokyo Electric. It trades about 0.11 of its potential returns per unit of risk. Tokyo Electric Power is currently generating about -0.06 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Brookfield Renewable Corp  vs.  Tokyo Electric Power

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.

Tokyo Electric Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tokyo Electric Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Brookfield Renewable and Tokyo Electric

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

The idea behind Brookfield Renewable Corp and Tokyo Electric Power 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..