Correlation Between Fortum Oyj and Brookfield Renewable
Can any of the company-specific risk be diversified away by investing in both Fortum Oyj 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 Fortum Oyj and Brookfield Renewable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortum Oyj and Brookfield Renewable Partners, you can compare the effects of market volatilities on Fortum Oyj 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 Fortum Oyj with a short position of Brookfield Renewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortum Oyj and Brookfield Renewable.
Diversification Opportunities for Fortum Oyj and Brookfield Renewable
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fortum and Brookfield is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Fortum Oyj and Brookfield Renewable Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Renewable and Fortum Oyj 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 Fortum Oyj 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 Fortum Oyj i.e., Fortum Oyj and Brookfield Renewable go up and down completely randomly.
Pair Corralation between Fortum Oyj and Brookfield Renewable
Assuming the 90 days horizon Fortum Oyj is expected to generate 0.66 times more return on investment than Brookfield Renewable. However, Fortum Oyj is 1.5 times less risky than Brookfield Renewable. It trades about -0.12 of its potential returns per unit of risk. Brookfield Renewable Partners is currently generating about -0.1 per unit of risk. If you would invest 1,525 in Fortum Oyj on August 28, 2024 and sell it today you would lose (68.00) from holding Fortum Oyj or give up 4.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortum Oyj vs. Brookfield Renewable Partners
Performance |
| Timeline |
| Fortum Oyj |
| Brookfield Renewable |
Fortum Oyj and Brookfield Renewable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortum Oyj and Brookfield Renewable
The main advantage of trading using opposite Fortum Oyj and Brookfield Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortum Oyj 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 Fortum Oyj and Brookfield Renewable Partners 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.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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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