Correlation Between Innergex Renewable and Clearway Energy

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

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

Diversification Opportunities for Innergex Renewable and Clearway Energy

0.85

Correlation Coefficient

Innergex Renewable  Clearway Energy

Very poor diversification

The 3 months correlation between Innergex and Clearway is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Innergex Renewable Energy and Clearway Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearway Energy and Innergex Renewable 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 Innergex Renewable Energy 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 has no effect on the direction of Innergex Renewable i.e., Innergex Renewable and Clearway Energy go up and down completely randomly.

Pair Corralation between Innergex Renewable and Clearway Energy

Assuming the 90 days horizon Innergex Renewable Energy is expected to generate 4.69 times more return on investment than Clearway Energy. However, Innergex Renewable is 4.69 times more volatile than Clearway Energy. It trades about 0.15 of its potential returns per unit of risk. Clearway Energy is currently generating about 0.17 per unit of risk. 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	Strong
Accuracy	98.39%
Values	Daily Returns

Innergex Renewable Energy  vs.  Clearway Energy

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.

Clearway Energy

Risk-Adjusted Performance

Good

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

Pair Trading with Innergex Renewable and Clearway Energy

The main advantage of trading using opposite Innergex Renewable and Clearway Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innergex Renewable 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 Innergex Renewable Energy and Clearway 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.