Correlation Between Clearway Energy and Innergex Renewable

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

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

Diversification Opportunities for Clearway Energy and Innergex Renewable

0.48

Correlation Coefficient

Clearway Energy  Innergex Renewable

Very weak diversification

The 3 months correlation between Clearway and Innergex is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Clearway Energy and Innergex Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innergex Renewable Energy 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 Innergex Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innergex Renewable Energy has no effect on the direction of Clearway Energy i.e., Clearway Energy and Innergex Renewable go up and down completely randomly.

Pair Corralation between Clearway Energy and Innergex Renewable

Assuming the 90 days trading horizon Clearway Energy is expected to under-perform the Innergex Renewable. But the stock apears to be less risky and, when comparing its historical volatility, Clearway Energy is 4.76 times less risky than Innergex Renewable. The stock trades about -0.03 of its potential returns per unit of risk. The Innergex Renewable Energy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  621.00  in Innergex Renewable Energy on December 1, 2024 and sell it today you would earn a total of  314.00  from holding Innergex Renewable Energy or generate 50.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Clearway Energy  vs.  Innergex Renewable Energy

Clearway Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clearway Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Clearway Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Innergex Renewable Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innergex Renewable Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Innergex Renewable reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clearway Energy and Innergex Renewable

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

The idea behind Clearway Energy and Innergex Renewable Energy 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 Anywhere module to track or share privately all of your investments from the convenience of any device.