Correlation Between Algonquin Power and Brookfield Renewable
Can any of the company-specific risk be diversified away by investing in both Algonquin Power 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 Algonquin Power and Brookfield Renewable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algonquin Power Utilities and Brookfield Renewable Partners, you can compare the effects of market volatilities on Algonquin Power 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 Algonquin Power with a short position of Brookfield Renewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Brookfield Renewable.
Diversification Opportunities for Algonquin Power and Brookfield Renewable
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Algonquin and Brookfield is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Brookfield Renewable Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Renewable and Algonquin Power 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 Algonquin Power Utilities 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 Algonquin Power i.e., Algonquin Power and Brookfield Renewable go up and down completely randomly.
Pair Corralation between Algonquin Power and Brookfield Renewable
Considering the 90-day investment horizon Algonquin Power Utilities is expected to generate 0.61 times more return on investment than Brookfield Renewable. However, Algonquin Power Utilities is 1.65 times less risky than Brookfield Renewable. It trades about -0.09 of its potential returns per unit of risk. Brookfield Renewable Partners is currently generating about -0.1 per unit of risk. If you would invest 501.00 in Algonquin Power Utilities on August 28, 2024 and sell it today you would lose (16.00) from holding Algonquin Power Utilities or give up 3.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. Brookfield Renewable Partners
Performance |
| Timeline |
| Algonquin Power Utilities |
| Brookfield Renewable |
Algonquin Power and Brookfield Renewable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Brookfield Renewable
The main advantage of trading using opposite Algonquin Power and Brookfield Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power 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.| Algonquin Power vs. Brookfield Renewable Corp | Algonquin Power vs. Nextera Energy Partners | Algonquin Power vs. Clearway Energy Class | Algonquin Power vs. Atlantica Sustainable Infrastructure |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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