Correlation Between Capstone Infrastructure and Brookfield Renewable

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

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

Diversification Opportunities for Capstone Infrastructure and Brookfield Renewable

0.41

Correlation Coefficient

Capstone Infrastructure  Brookfield Renewable

Very weak diversification

The 3 months correlation between Capstone and Brookfield is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Infrastructure Corp and Brookfield Renewable Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Renewable and Capstone Infrastructure 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 Capstone Infrastructure 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 has no effect on the direction of Capstone Infrastructure i.e., Capstone Infrastructure and Brookfield Renewable go up and down completely randomly.

Pair Corralation between Capstone Infrastructure and Brookfield Renewable

Assuming the 90 days trading horizon Capstone Infrastructure is expected to generate 2.77 times less return on investment than Brookfield Renewable. But when comparing it to its historical volatility, Capstone Infrastructure Corp is 1.45 times less risky than Brookfield Renewable. It trades about 0.04 of its potential returns per unit of risk. Brookfield Renewable Partners is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,163  in Brookfield Renewable Partners on September 13, 2024 and sell it today you would earn a total of  73.00  from holding Brookfield Renewable Partners or generate 3.37% return on investment over 90 days.

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

Capstone Infrastructure Corp  vs.  Brookfield Renewable Partners

Capstone Infrastructure

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capstone Infrastructure Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Capstone Infrastructure is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Brookfield Renewable

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Renewable Partners are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield Renewable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Capstone Infrastructure and Brookfield Renewable

The main advantage of trading using opposite Capstone Infrastructure and Brookfield Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capstone Infrastructure 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 Capstone Infrastructure Corp and Brookfield Renewable Partners 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.