Correlation Between ChampionX and Brookfield Renewable

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

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

Diversification Opportunities for ChampionX and Brookfield Renewable

0.01

Correlation Coefficient

ChampionX  Brookfield Renewable

Significant diversification

The 3 months correlation between ChampionX and Brookfield is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding ChampionX and Brookfield Renewable Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Renewable and ChampionX 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 ChampionX are associated (or correlated) with Brookfield Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Renewable has no effect on the direction of ChampionX i.e., ChampionX and Brookfield Renewable go up and down completely randomly.

Pair Corralation between ChampionX and Brookfield Renewable

Considering the 90-day investment horizon ChampionX is expected to generate 3.06 times more return on investment than Brookfield Renewable. However, ChampionX is 3.06 times more volatile than Brookfield Renewable Partners. It trades about 0.11 of its potential returns per unit of risk. Brookfield Renewable Partners is currently generating about 0.0 per unit of risk. If you would invest  2,661  in ChampionX on December 30, 2024 and sell it today you would earn a total of  326.00  from holding ChampionX or generate 12.25% return on investment over 90 days.

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

ChampionX  vs.  Brookfield Renewable Partners

ChampionX

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ChampionX are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical indicators, ChampionX showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with ChampionX and Brookfield Renewable

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

The idea behind ChampionX and Brookfield Renewable Partners 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.