Correlation Between Brookfield Renewable and ATCO
Can any of the company-specific risk be diversified away by investing in both Brookfield Renewable and ATCO 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 Brookfield Renewable and ATCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield Renewable Partners and ATCO, you can compare the effects of market volatilities on Brookfield Renewable and ATCO 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 Brookfield Renewable with a short position of ATCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Renewable and ATCO.
Diversification Opportunities for Brookfield Renewable and ATCO
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Brookfield and ATCO is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Partners and ATCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATCO and Brookfield Renewable 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 Brookfield Renewable Partners are associated (or correlated) with ATCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATCO has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and ATCO go up and down completely randomly.
Pair Corralation between Brookfield Renewable and ATCO
Assuming the 90 days trading horizon Brookfield Renewable Partners is expected to under-perform the ATCO. But the stock apears to be less risky and, when comparing its historical volatility, Brookfield Renewable Partners is 1.01 times less risky than ATCO. The stock trades about -0.15 of its potential returns per unit of risk. The ATCO is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 5,100 in ATCO on September 26, 2024 and sell it today you would lose (210.00) from holding ATCO or give up 4.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Renewable Partners vs. ATCO
Performance |
| Timeline |
| Brookfield Renewable |
| ATCO |
Brookfield Renewable and ATCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Renewable and ATCO
The main advantage of trading using opposite Brookfield Renewable and ATCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Renewable position performs unexpectedly, ATCO 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 ATCO will offset losses from the drop in ATCO's long position.The idea behind Brookfield Renewable Partners and ATCO 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.| ATCO vs. Brookfield Renewable Partners | ATCO vs. Emera Inc | ATCO vs. Fortis Inc | ATCO vs. Algonquin Power Utilities |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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