Correlation Between Fluence Energy and Clearway Energy

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

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

Diversification Opportunities for Fluence Energy and Clearway Energy

0.26

Correlation Coefficient

Fluence Energy  Clearway Energy

Modest diversification

The 3 months correlation between Fluence and Clearway is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Fluence Energy and Clearway Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearway Energy and Fluence Energy 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 Fluence Energy 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 Fluence Energy i.e., Fluence Energy and Clearway Energy go up and down completely randomly.

Pair Corralation between Fluence Energy and Clearway Energy

Given the investment horizon of 90 days Fluence Energy is expected to under-perform the Clearway Energy. In addition to that, Fluence Energy is 2.2 times more volatile than Clearway Energy. It trades about 0.0 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  2,510  in Clearway Energy on September 6, 2024 and sell it today you would earn a total of  151.00  from holding Clearway Energy or generate 6.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Fluence Energy  vs.  Clearway Energy

Fluence Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fluence Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Fluence Energy is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 January 2025.

Pair Trading with Fluence Energy and Clearway Energy

The main advantage of trading using opposite Fluence Energy and Clearway Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fluence Energy 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 Fluence Energy 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.