Correlation Between Eversource Energy and Brookfield Renewable

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

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

Diversification Opportunities for Eversource Energy and Brookfield Renewable

-0.8

Correlation Coefficient

Eversource Energy  Brookfield Renewable

Pay attention - limited upside

The 3 months correlation between Eversource and Brookfield is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Eversource Energy and Brookfield Renewable Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Renewable and Eversource 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 Eversource Energy are associated (or correlated) with Brookfield Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Renewable has no effect on the direction of Eversource Energy i.e., Eversource Energy and Brookfield Renewable go up and down completely randomly.

Pair Corralation between Eversource Energy and Brookfield Renewable

Allowing for the 90-day total investment horizon Eversource Energy is expected to under-perform the Brookfield Renewable. In addition to that, Eversource Energy is 1.79 times more volatile than Brookfield Renewable Partners. It trades about -0.07 of its total potential returns per unit of risk. Brookfield Renewable Partners is currently generating about 0.09 per unit of volatility. If you would invest  2,507  in Brookfield Renewable Partners on September 4, 2024 and sell it today you would earn a total of  89.00  from holding Brookfield Renewable Partners or generate 3.55% return on investment over 90 days.

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

Eversource Energy  vs.  Brookfield Renewable Partners

Eversource Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eversource Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Eversource Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Brookfield Renewable

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Renewable Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Brookfield Renewable is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Eversource Energy and Brookfield Renewable

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

The idea behind Eversource Energy and Brookfield Renewable Partners 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.