Correlation Between Clearway Energy and Renew Energy

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

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

Diversification Opportunities for Clearway Energy and Renew Energy

-0.46

Correlation Coefficient

Clearway Energy  Renew Energy

Very good diversification

The 3 months correlation between Clearway and Renew is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Clearway Energy Class and Renew Energy Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renew Energy Global 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 Class are associated (or correlated) with Renew Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renew Energy Global has no effect on the direction of Clearway Energy i.e., Clearway Energy and Renew Energy go up and down completely randomly.

Pair Corralation between Clearway Energy and Renew Energy

Given the investment horizon of 90 days Clearway Energy Class is expected to under-perform the Renew Energy. But the stock apears to be less risky and, when comparing its historical volatility, Clearway Energy Class is 1.87 times less risky than Renew Energy. The stock trades about -0.09 of its potential returns per unit of risk. The Renew Energy Global is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  603.00  in Renew Energy Global on November 28, 2024 and sell it today you would earn a total of  37.00  from holding Renew Energy Global or generate 6.14% return on investment over 90 days.

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

Clearway Energy Class  vs.  Renew Energy Global

Clearway Energy Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clearway Energy Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Renew Energy Global

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Renew Energy Global are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Renew Energy may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Clearway Energy and Renew Energy

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

The idea behind Clearway Energy Class and Renew Energy Global 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.