Correlation Between Montauk Renewables and Brookfield Infrastructure

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

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

Diversification Opportunities for Montauk Renewables and Brookfield Infrastructure

-0.35

Correlation Coefficient

Montauk Renewables  Brookfield Infrastructure

Very good diversification

The 3 months correlation between Montauk and Brookfield is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Brookfield Infrastructure Part in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Infrastructure and Montauk Renewables 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 Montauk Renewables are associated (or correlated) with Brookfield Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Infrastructure has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and Brookfield Infrastructure go up and down completely randomly.

Pair Corralation between Montauk Renewables and Brookfield Infrastructure

Given the investment horizon of 90 days Montauk Renewables is expected to generate 3.82 times more return on investment than Brookfield Infrastructure. However, Montauk Renewables is 3.82 times more volatile than Brookfield Infrastructure Partners. It trades about 0.01 of its potential returns per unit of risk. Brookfield Infrastructure Partners is currently generating about -0.09 per unit of risk. If you would invest  442.00  in Montauk Renewables on November 29, 2024 and sell it today you would lose (14.00) from holding Montauk Renewables or give up 3.17% of portfolio value over 90 days.

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

Montauk Renewables  vs.  Brookfield Infrastructure Part

Montauk Renewables

Risk-Adjusted Performance

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Montauk Renewables is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Brookfield Infrastructure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Infrastructure Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Brookfield Infrastructure is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Montauk Renewables and Brookfield Infrastructure

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

The idea behind Montauk Renewables and Brookfield Infrastructure 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.