Correlation Between First National and Brookfield Renewable

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

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

Diversification Opportunities for First National and Brookfield Renewable

-0.07

Correlation Coefficient

First National  Brookfield Renewable

Good diversification

The 3 months correlation between First and Brookfield is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding First National Energy and Brookfield Renewable Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Renewable and First National 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 First National Energy 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 First National i.e., First National and Brookfield Renewable go up and down completely randomly.

Pair Corralation between First National and Brookfield Renewable

Given the investment horizon of 90 days First National is expected to generate 3.78 times less return on investment than Brookfield Renewable. In addition to that, First National is 7.14 times more volatile than Brookfield Renewable Partners. It trades about 0.0 of its total potential returns per unit of risk. Brookfield Renewable Partners is currently generating about 0.08 per unit of volatility. 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	100.0%
Values	Daily Returns

First National Energy  vs.  Brookfield Renewable Partners

First National Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with First National and Brookfield Renewable

The main advantage of trading using opposite First National and Brookfield Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First National 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 First National Energy 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.