Correlation Between Emera and Brookfield Renewable
Can any of the company-specific risk be diversified away by investing in both Emera and Brookfield Renewable 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 Emera and Brookfield Renewable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emera Inc and Brookfield Renewable Energy, you can compare the effects of market volatilities on Emera and Brookfield Renewable 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 Emera with a short position of Brookfield Renewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emera and Brookfield Renewable.
Diversification Opportunities for Emera and Brookfield Renewable
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Emera and Brookfield is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Emera Inc and Brookfield Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Renewable and Emera 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 Emera Inc are associated (or correlated) with Brookfield Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Renewable has no effect on the direction of Emera i.e., Emera and Brookfield Renewable go up and down completely randomly.
Pair Corralation between Emera and Brookfield Renewable
Assuming the 90 days trading horizon Emera Inc is expected to generate 1.06 times more return on investment than Brookfield Renewable. However, Emera is 1.06 times more volatile than Brookfield Renewable Energy. It trades about 0.08 of its potential returns per unit of risk. Brookfield Renewable Energy is currently generating about 0.08 per unit of risk. If you would invest 2,176 in Emera Inc on September 12, 2024 and sell it today you would earn a total of 174.00 from holding Emera Inc or generate 8.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emera Inc vs. Brookfield Renewable Energy
Performance |
| Timeline |
| Emera Inc |
| Brookfield Renewable |
Emera and Brookfield Renewable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emera and Brookfield Renewable
The main advantage of trading using opposite Emera and Brookfield Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emera position performs unexpectedly, Brookfield Renewable 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 Brookfield Renewable will offset losses from the drop in Brookfield Renewable's long position.The idea behind Emera Inc and Brookfield Renewable Energy 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.| Brookfield Renewable vs. Microsoft Corp CDR | Brookfield Renewable vs. Apple Inc CDR | Brookfield Renewable vs. Alphabet Inc CDR | Brookfield Renewable vs. Amazon CDR |
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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