Correlation Between Clearway Energy and Cheniere Energy

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

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

Diversification Opportunities for Clearway Energy and Cheniere Energy

-0.03

Correlation Coefficient

Clearway Energy  Cheniere Energy

Good diversification

The 3 months correlation between Clearway and Cheniere is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Clearway Energy and Cheniere Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere 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 Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy has no effect on the direction of Clearway Energy i.e., Clearway Energy and Cheniere Energy go up and down completely randomly.

Pair Corralation between Clearway Energy and Cheniere Energy

Assuming the 90 days trading horizon Clearway Energy is expected to generate 2.59 times less return on investment than Cheniere Energy. In addition to that, Clearway Energy is 1.48 times more volatile than Cheniere Energy. It trades about 0.06 of its total potential returns per unit of risk. Cheniere Energy is currently generating about 0.22 per unit of volatility. If you would invest  18,243  in Cheniere Energy on August 31, 2024 and sell it today you would earn a total of  3,934  from holding Cheniere Energy or generate 21.56% return on investment over 90 days.

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

Clearway Energy  vs.  Cheniere Energy

Clearway Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clearway Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Clearway Energy may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Cheniere Energy

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clearway Energy and Cheniere Energy

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

The idea behind Clearway Energy and Cheniere 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..