Correlation Between ReNew Energy and Alternus Energy

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

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

Diversification Opportunities for ReNew Energy and Alternus Energy

0.7

Correlation Coefficient

ReNew Energy  Alternus Energy

Poor diversification

The 3 months correlation between ReNew and Alternus is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ReNew Energy Global and Alternus Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alternus Energy Group and ReNew 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 ReNew Energy Global are associated (or correlated) with Alternus Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alternus Energy Group has no effect on the direction of ReNew Energy i.e., ReNew Energy and Alternus Energy go up and down completely randomly.

Pair Corralation between ReNew Energy and Alternus Energy

Assuming the 90 days horizon ReNew Energy Global is expected to generate 4.21 times more return on investment than Alternus Energy. However, ReNew Energy is 4.21 times more volatile than Alternus Energy Group. It trades about 0.09 of its potential returns per unit of risk. Alternus Energy Group is currently generating about -0.75 per unit of risk. If you would invest  20.00  in ReNew Energy Global on September 2, 2024 and sell it today you would earn a total of  1.00  from holding ReNew Energy Global or generate 5.0% return on investment over 90 days.

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

ReNew Energy Global  vs.  Alternus Energy Group

ReNew Energy Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ReNew Energy Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ReNew Energy is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Alternus Energy Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alternus Energy Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ReNew Energy and Alternus Energy

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

The idea behind ReNew Energy Global and Alternus Energy Group 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.