Correlation Between Brookfield Renewable and Verde Clean

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

Diversification Opportunities for Brookfield Renewable and Verde Clean

0.51

Correlation Coefficient

Brookfield Renewable  Verde Clean

Very weak diversification

The 3 months correlation between Brookfield and Verde is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Corp and Verde Clean Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verde Clean Fuels 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 Verde Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verde Clean Fuels has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and Verde Clean go up and down completely randomly.

Pair Corralation between Brookfield Renewable and Verde Clean

Given the investment horizon of 90 days Brookfield Renewable Corp is expected to generate 0.88 times more return on investment than Verde Clean. However, Brookfield Renewable Corp is 1.13 times less risky than Verde Clean. It trades about 0.11 of its potential returns per unit of risk. Verde Clean Fuels is currently generating about -0.07 per unit of risk. If you would invest  2,555  in Brookfield Renewable Corp on December 5, 2024 and sell it today you would earn a total of  114.00  from holding Brookfield Renewable Corp or generate 4.46% return on investment over 90 days.

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

Brookfield Renewable Corp  vs.  Verde Clean Fuels

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.

Verde Clean Fuels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Verde Clean Fuels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Verde Clean is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Brookfield Renewable and Verde Clean

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

The idea behind Brookfield Renewable Corp and Verde Clean Fuels 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.