Correlation Between Superior Plus and Brookfield Renewable

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

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

Diversification Opportunities for Superior Plus and Brookfield Renewable

0.1

Correlation Coefficient

Superior Plus  Brookfield Renewable

Average diversification

The 3 months correlation between Superior and Brookfield is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Brookfield Renewable Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Renewable Corp and Superior Plus 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 Superior Plus Corp 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 Corp has no effect on the direction of Superior Plus i.e., Superior Plus and Brookfield Renewable go up and down completely randomly.

Pair Corralation between Superior Plus and Brookfield Renewable

Assuming the 90 days trading horizon Superior Plus is expected to generate 1.56 times less return on investment than Brookfield Renewable. But when comparing it to its historical volatility, Superior Plus Corp is 1.04 times less risky than Brookfield Renewable. It trades about 0.01 of its potential returns per unit of risk. Brookfield Renewable Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,667  in Brookfield Renewable Corp on September 27, 2024 and sell it today you would earn a total of  448.00  from holding Brookfield Renewable Corp or generate 12.22% return on investment over 90 days.

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

Superior Plus Corp  vs.  Brookfield Renewable Corp

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Brookfield Renewable Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookfield Renewable Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Brookfield Renewable is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Superior Plus and Brookfield Renewable

The main advantage of trading using opposite Superior Plus and Brookfield Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus 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 Superior Plus Corp and Brookfield Renewable Corp 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.