Correlation Between Clearway Energy and China Longyuan
Can any of the company-specific risk be diversified away by investing in both Clearway Energy and China Longyuan 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 Clearway Energy and China Longyuan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clearway Energy and China Longyuan Power, you can compare the effects of market volatilities on Clearway Energy and China Longyuan 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 Clearway Energy with a short position of China Longyuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearway Energy and China Longyuan.
Diversification Opportunities for Clearway Energy and China Longyuan
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Clearway and China is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Clearway Energy and China Longyuan Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Longyuan Power and Clearway 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 Clearway Energy are associated (or correlated) with China Longyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Longyuan Power has no effect on the direction of Clearway Energy i.e., Clearway Energy and China Longyuan go up and down completely randomly.
Pair Corralation between Clearway Energy and China Longyuan
Assuming the 90 days trading horizon Clearway Energy is expected to generate 0.92 times more return on investment than China Longyuan. However, Clearway Energy is 1.08 times less risky than China Longyuan. It trades about -0.04 of its potential returns per unit of risk. China Longyuan Power is currently generating about -0.14 per unit of risk. If you would invest 2,504 in Clearway Energy on November 4, 2024 and sell it today you would lose (51.00) from holding Clearway Energy or give up 2.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Clearway Energy vs. China Longyuan Power
Performance |
| Timeline |
| Clearway Energy |
| China Longyuan Power |
Clearway Energy and China Longyuan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clearway Energy and China Longyuan
The main advantage of trading using opposite Clearway Energy and China Longyuan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearway Energy position performs unexpectedly, China Longyuan 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 China Longyuan will offset losses from the drop in China Longyuan's long position.| Clearway Energy vs. Brookfield Renewable Corp | Clearway Energy vs. Nextera Energy Partners | Clearway Energy vs. Brookfield Renewable Partners | Clearway Energy vs. Clearway Energy Class |
| China Longyuan vs. Clearway Energy | China Longyuan vs. Brookfield Renewable Corp | China Longyuan vs. Nextera Energy Partners | China Longyuan vs. Brookfield Renewable Partners |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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