Correlation Between Brookfield Renewable and Emera

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

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

Diversification Opportunities for Brookfield Renewable and Emera

0.63

Correlation Coefficient

Brookfield Renewable  Emera

Poor diversification

The 3 months correlation between Brookfield and Emera is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Partners and Emera Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Inc and Brookfield 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 Brookfield Renewable Partners are associated (or correlated) with Emera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Inc has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and Emera go up and down completely randomly.

Pair Corralation between Brookfield Renewable and Emera

Assuming the 90 days trading horizon Brookfield Renewable Partners is expected to generate 1.73 times more return on investment than Emera. However, Brookfield Renewable is 1.73 times more volatile than Emera Inc. It trades about 0.11 of its potential returns per unit of risk. Emera Inc is currently generating about 0.08 per unit of risk. If you would invest  3,248  in Brookfield Renewable Partners on August 31, 2024 and sell it today you would earn a total of  465.00  from holding Brookfield Renewable Partners or generate 14.32% return on investment over 90 days.

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

Brookfield Renewable Partners  vs.  Emera Inc

Brookfield Renewable

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Renewable Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brookfield Renewable sustained solid returns over the last few months and may actually be approaching a breakup point.

Emera Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Emera Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Emera is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Brookfield Renewable and Emera

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

The idea behind Brookfield Renewable Partners and Emera Inc 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.