Correlation Between Orsted AS and Clearway Energy

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

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

Diversification Opportunities for Orsted AS and Clearway Energy

0.65

Correlation Coefficient

Orsted AS  Clearway Energy

Poor diversification

The 3 months correlation between Orsted and Clearway is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Orsted AS ADR and Clearway Energy Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearway Energy Class and Orsted AS 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 Orsted AS ADR are associated (or correlated) with Clearway Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearway Energy Class has no effect on the direction of Orsted AS i.e., Orsted AS and Clearway Energy go up and down completely randomly.

Pair Corralation between Orsted AS and Clearway Energy

Assuming the 90 days horizon Orsted AS is expected to generate 8.98 times less return on investment than Clearway Energy. In addition to that, Orsted AS is 1.79 times more volatile than Clearway Energy Class. It trades about 0.01 of its total potential returns per unit of risk. Clearway Energy Class is currently generating about 0.17 per unit of volatility. If you would invest  2,575  in Clearway Energy Class on December 30, 2024 and sell it today you would earn a total of  442.00  from holding Clearway Energy Class or generate 17.17% return on investment over 90 days.

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

Orsted AS ADR  vs.  Clearway Energy Class

Orsted AS ADR

Risk-Adjusted Performance

Very Weak

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

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.

Pair Trading with Orsted AS and Clearway Energy

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

The idea behind Orsted AS ADR and Clearway Energy Class 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.