Correlation Between Brookfield Renewable and Clearway Energy

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

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

Diversification Opportunities for Brookfield Renewable and Clearway Energy

0.12

Correlation Coefficient

Brookfield Renewable  Clearway Energy

Average diversification

The 3 months correlation between Brookfield and Clearway is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Corp and Clearway Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearway Energy 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 Corp are associated (or correlated) with Clearway Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearway Energy has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and Clearway Energy go up and down completely randomly.

Pair Corralation between Brookfield Renewable and Clearway Energy

Given the investment horizon of 90 days Brookfield Renewable is expected to generate 2.42 times less return on investment than Clearway Energy. In addition to that, Brookfield Renewable is 1.14 times more volatile than Clearway Energy. It trades about 0.02 of its total potential returns per unit of risk. Clearway Energy is currently generating about 0.05 per unit of volatility. If you would invest  2,494  in Clearway Energy on August 31, 2024 and sell it today you would earn a total of  287.00  from holding Clearway Energy or generate 11.51% return on investment over 90 days.

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

Brookfield Renewable Corp  vs.  Clearway Energy

Brookfield Renewable Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Renewable Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Brookfield Renewable exhibited solid returns over the last few months and may actually be approaching a breakup point.

Clearway Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clearway Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Clearway Energy may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Brookfield Renewable and Clearway Energy

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

The idea behind Brookfield Renewable Corp and Clearway Energy 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..