Correlation Between Brookfield Renewable and Southern

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

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

Diversification Opportunities for Brookfield Renewable and Southern

0.36

Correlation Coefficient

Brookfield Renewable  Southern

Weak diversification

The 3 months correlation between Brookfield and Southern is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Partners and Southern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern 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 Partners are associated (or correlated) with Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and Southern go up and down completely randomly.

Pair Corralation between Brookfield Renewable and Southern

Given the investment horizon of 90 days Brookfield Renewable Partners is expected to under-perform the Southern. But the stock apears to be less risky and, when comparing its historical volatility, Brookfield Renewable Partners is 1.33 times less risky than Southern. The stock trades about 0.0 of its potential returns per unit of risk. The Southern Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,047  in Southern Co on December 30, 2024 and sell it today you would earn a total of  5.00  from holding Southern Co or generate 0.24% 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 Partners  vs.  Southern Co

Brookfield Renewable

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Renewable Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Brookfield Renewable is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Southern

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southern Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, Southern is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Brookfield Renewable and Southern

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

The idea behind Brookfield Renewable Partners and Southern Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.