Correlation Between Orsted A/S and Innergex Renewable

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

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

Diversification Opportunities for Orsted A/S and Innergex Renewable

0.7

Correlation Coefficient

Orsted A/S  Innergex Renewable

Poor diversification

The 3 months correlation between Orsted and Innergex is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Orsted AS 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 Orsted A/S 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 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 Orsted A/S i.e., Orsted A/S and Innergex Renewable go up and down completely randomly.

Pair Corralation between Orsted A/S and Innergex Renewable

Assuming the 90 days horizon Orsted A/S is expected to generate 7.24 times less return on investment than Innergex Renewable. But when comparing it to its historical volatility, Orsted AS is 1.74 times less risky than Innergex Renewable. It trades about 0.04 of its potential returns per unit of risk. Innergex Renewable Energy is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  555.00  in Innergex Renewable Energy on December 30, 2024 and sell it today you would earn a total of  393.00  from holding Innergex Renewable Energy or generate 70.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Orsted AS  vs.  Innergex Renewable Energy

Orsted A/S

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orsted AS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Orsted A/S may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Innergex Renewable Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innergex Renewable Energy are ranked lower than 11 (%) 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 Orsted A/S and Innergex Renewable

The main advantage of trading using opposite Orsted A/S and Innergex Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orsted A/S 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 Orsted AS 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.