Correlation Between Brookfield Renewable and TransAlta Renewables

Can any of the company-specific risk be diversified away by investing in both Brookfield Renewable and TransAlta Renewables 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 TransAlta Renewables 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 TransAlta Renewables, you can compare the effects of market volatilities on Brookfield Renewable and TransAlta Renewables 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 TransAlta Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Renewable and TransAlta Renewables.

Diversification Opportunities for Brookfield Renewable and TransAlta Renewables

-0.09

Correlation Coefficient

Brookfield Renewable  TransAlta Renewables

Good diversification

The 3 months correlation between Brookfield and TransAlta is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Partners and TransAlta Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta Renewables 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 TransAlta Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransAlta Renewables has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and TransAlta Renewables go up and down completely randomly.

Pair Corralation between Brookfield Renewable and TransAlta Renewables

If you would invest  2,394  in Brookfield Renewable Partners on August 31, 2024 and sell it today you would earn a total of  240.00  from holding Brookfield Renewable Partners or generate 10.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Brookfield Renewable Partners  vs.  TransAlta Renewables

Brookfield Renewable

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Renewable Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical and fundamental indicators, Brookfield Renewable may actually be approaching a critical reversion point that can send shares even higher in December 2024.

TransAlta Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TransAlta Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TransAlta Renewables is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Brookfield Renewable and TransAlta Renewables

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

The idea behind Brookfield Renewable Partners and TransAlta Renewables 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.