Correlation Between Clearway Energy and Altus Power

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

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

Diversification Opportunities for Clearway Energy and Altus Power

0.7

Correlation Coefficient

Clearway Energy  Altus Power

Poor diversification

The 3 months correlation between Clearway and Altus is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Clearway Energy and Altus Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altus Power and Clearway Energy 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 Clearway Energy are associated (or correlated) with Altus Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altus Power has no effect on the direction of Clearway Energy i.e., Clearway Energy and Altus Power go up and down completely randomly.

Pair Corralation between Clearway Energy and Altus Power

Assuming the 90 days trading horizon Clearway Energy is expected to generate 1.36 times less return on investment than Altus Power. But when comparing it to its historical volatility, Clearway Energy is 2.74 times less risky than Altus Power. It trades about 0.17 of its potential returns per unit of risk. Altus Power is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  414.00  in Altus Power on December 30, 2024 and sell it today you would earn a total of  80.00  from holding Altus Power or generate 19.32% return on investment over 90 days.

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

Clearway Energy  vs.  Altus Power

Clearway Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clearway Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Clearway Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Altus Power

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Altus Power are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Altus Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clearway Energy and Altus Power

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

The idea behind Clearway Energy and Altus 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.