Correlation Between Orsted A/S and Constellation Energy
Can any of the company-specific risk be diversified away by investing in both Orsted A/S and Constellation Energy 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 Orsted A/S and Constellation Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orsted AS ADR and Constellation Energy Corp, you can compare the effects of market volatilities on Orsted A/S and Constellation Energy 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 Orsted A/S with a short position of Constellation Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orsted A/S and Constellation Energy.
Diversification Opportunities for Orsted A/S and Constellation Energy
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Orsted and Constellation is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Orsted AS ADR and Constellation Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Energy Corp and Orsted A/S 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 Orsted AS ADR are associated (or correlated) with Constellation Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Energy Corp has no effect on the direction of Orsted A/S i.e., Orsted A/S and Constellation Energy go up and down completely randomly.
Pair Corralation between Orsted A/S and Constellation Energy
Assuming the 90 days horizon Orsted AS ADR is expected to under-perform the Constellation Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Orsted AS ADR is 2.35 times less risky than Constellation Energy. The pink sheet trades about -0.3 of its potential returns per unit of risk. The Constellation Energy Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 25,240 in Constellation Energy Corp on November 4, 2024 and sell it today you would earn a total of 4,758 from holding Constellation Energy Corp or generate 18.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orsted AS ADR vs. Constellation Energy Corp
Performance |
| Timeline |
| Orsted AS ADR |
| Constellation Energy Corp |
Orsted A/S and Constellation Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orsted A/S and Constellation Energy
The main advantage of trading using opposite Orsted A/S and Constellation Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orsted A/S position performs unexpectedly, Constellation Energy 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 Constellation Energy will offset losses from the drop in Constellation Energy's long position.| Orsted A/S vs. Brookfield Renewable Partners | Orsted A/S vs. Brookfield Renewable Corp | Orsted A/S vs. Clearway Energy Class | Orsted A/S vs. Nextera Energy Partners |
| Constellation Energy vs. Clearway Energy | Constellation Energy vs. Brookfield Renewable Corp | Constellation Energy vs. Nextera Energy Partners | Constellation Energy 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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