Correlation Between Brookfield Renewable and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both Brookfield Renewable and Algonquin 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 Algonquin 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 Algonquin Power Utilities, you can compare the effects of market volatilities on Brookfield Renewable and Algonquin 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 Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Renewable and Algonquin Power.
Diversification Opportunities for Brookfield Renewable and Algonquin Power
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Brookfield and Algonquin is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Partners and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities 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 Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and Algonquin Power go up and down completely randomly.
Pair Corralation between Brookfield Renewable and Algonquin Power
Considering the 90-day investment horizon Brookfield Renewable Partners is expected to generate 1.23 times more return on investment than Algonquin Power. However, Brookfield Renewable is 1.23 times more volatile than Algonquin Power Utilities. It trades about 0.02 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about 0.01 per unit of risk. If you would invest 2,362 in Brookfield Renewable Partners on August 24, 2024 and sell it today you would earn a total of 191.00 from holding Brookfield Renewable Partners or generate 8.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 55.6% |
| Values | Daily Returns |
Brookfield Renewable Partners vs. Algonquin Power Utilities
Performance |
| Timeline |
| Brookfield Renewable |
| Algonquin Power Utilities |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Brookfield Renewable and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Renewable and Algonquin Power
The main advantage of trading using opposite Brookfield Renewable and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Renewable position performs unexpectedly, Algonquin 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 Algonquin Power will offset losses from the drop in Algonquin Power's long position.The idea behind Brookfield Renewable Partners and Algonquin Power Utilities 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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