Correlation Between Tokyo Electric and Brookfield Renewable

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

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

Diversification Opportunities for Tokyo Electric and Brookfield Renewable

0.13

Correlation Coefficient

Tokyo Electric  Brookfield Renewable

Average diversification

The 3 months correlation between Tokyo and Brookfield is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Tokyo Electric Power 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 Tokyo Electric 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 Tokyo Electric Power 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 Tokyo Electric i.e., Tokyo Electric and Brookfield Renewable go up and down completely randomly.

Pair Corralation between Tokyo Electric and Brookfield Renewable

Assuming the 90 days horizon Tokyo Electric Power is expected to generate 3.75 times more return on investment than Brookfield Renewable. However, Tokyo Electric is 3.75 times more volatile than Brookfield Renewable Corp. It trades about 0.02 of its potential returns per unit of risk. Brookfield Renewable Corp is currently generating about 0.02 per unit of risk. If you would invest  317.00  in Tokyo Electric Power on December 30, 2024 and sell it today you would lose (32.00) from holding Tokyo Electric Power or give up 10.09% of portfolio value over 90 days.

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

Tokyo Electric Power  vs.  Brookfield Renewable Corp

Tokyo Electric Power

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyo Electric Power are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Tokyo Electric may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Brookfield Renewable Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Renewable Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Brookfield Renewable is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tokyo Electric and Brookfield Renewable

The main advantage of trading using opposite Tokyo Electric and Brookfield Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokyo Electric 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 Tokyo Electric Power 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.