Correlation Between Clearway Energy and Tokyo Electric

Can any of the company-specific risk be diversified away by investing in both Clearway Energy and Tokyo Electric 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 Tokyo Electric 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 Tokyo Electric Power, you can compare the effects of market volatilities on Clearway Energy and Tokyo Electric 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 Tokyo Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearway Energy and Tokyo Electric.

Diversification Opportunities for Clearway Energy and Tokyo Electric

0.25

Correlation Coefficient

Clearway Energy  Tokyo Electric

Modest diversification

The 3 months correlation between Clearway and Tokyo is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Clearway Energy Class and Tokyo Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electric 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 Class are associated (or correlated) with Tokyo Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Electric Power has no effect on the direction of Clearway Energy i.e., Clearway Energy and Tokyo Electric go up and down completely randomly.

Pair Corralation between Clearway Energy and Tokyo Electric

Given the investment horizon of 90 days Clearway Energy Class is expected to generate 0.2 times more return on investment than Tokyo Electric. However, Clearway Energy Class is 4.93 times less risky than Tokyo Electric. It trades about 0.17 of its potential returns per unit of risk. Tokyo Electric Power is currently generating about 0.02 per unit of risk. If you would invest  2,575  in Clearway Energy Class on December 29, 2024 and sell it today you would earn a total of  432.00  from holding Clearway Energy Class or generate 16.78% return on investment over 90 days.

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

Clearway Energy Class  vs.  Tokyo Electric Power

Clearway Energy Class

Risk-Adjusted Performance

Good

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

Tokyo Electric Power

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyo Electric Power are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Tokyo Electric may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Clearway Energy and Tokyo Electric

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

The idea behind Clearway Energy Class and Tokyo Electric 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.