Correlation Between Brookfield Renewable and Northland Power
Can any of the company-specific risk be diversified away by investing in both Brookfield Renewable and Northland Power 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 Northland Power 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 Northland Power, you can compare the effects of market volatilities on Brookfield Renewable and Northland Power 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 Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Renewable and Northland Power.
Diversification Opportunities for Brookfield Renewable and Northland Power
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Brookfield and Northland is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Partners and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power 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 Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and Northland Power go up and down completely randomly.
Pair Corralation between Brookfield Renewable and Northland Power
Assuming the 90 days trading horizon Brookfield Renewable Partners is expected to under-perform the Northland Power. In addition to that, Brookfield Renewable is 1.12 times more volatile than Northland Power. It trades about -0.32 of its total potential returns per unit of risk. Northland Power is currently generating about 0.25 per unit of volatility. If you would invest 1,794 in Northland Power on October 22, 2024 and sell it today you would earn a total of 130.00 from holding Northland Power or generate 7.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Renewable Partners vs. Northland Power
Performance |
| Timeline |
| Brookfield Renewable |
| Northland Power |
Brookfield Renewable and Northland Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Renewable and Northland Power
The main advantage of trading using opposite Brookfield Renewable and Northland Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Renewable position performs unexpectedly, Northland Power 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 Northland Power will offset losses from the drop in Northland Power's long position.| Brookfield Renewable vs. Brookfield Infrastructure Partners | Brookfield Renewable vs. Algonquin Power Utilities | Brookfield Renewable vs. Northland Power | Brookfield Renewable vs. Fortis Inc |
| Northland Power vs. Brookfield Renewable Partners | Northland Power vs. Algonquin Power Utilities | Northland Power vs. Innergex Renewable Energy | Northland Power vs. Capital Power |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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