Correlation Between Brookfield Renewable and VERBUND AG

Can any of the company-specific risk be diversified away by investing in both Brookfield Renewable and VERBUND AG 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 VERBUND AG 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 VERBUND AG, you can compare the effects of market volatilities on Brookfield Renewable and VERBUND AG 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 VERBUND AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Renewable and VERBUND AG.

Diversification Opportunities for Brookfield Renewable and VERBUND AG

-0.5

Correlation Coefficient

Brookfield Renewable  VERBUND AG

Very good diversification

The 3 months correlation between Brookfield and VERBUND is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Partners and VERBUND AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VERBUND AG 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 VERBUND AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VERBUND AG has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and VERBUND AG go up and down completely randomly.

Pair Corralation between Brookfield Renewable and VERBUND AG

Assuming the 90 days horizon Brookfield Renewable Partners is expected to generate 0.17 times more return on investment than VERBUND AG. However, Brookfield Renewable Partners is 6.0 times less risky than VERBUND AG. It trades about 0.12 of its potential returns per unit of risk. VERBUND AG is currently generating about -0.04 per unit of risk. If you would invest  1,967  in Brookfield Renewable Partners on January 20, 2024 and sell it today you would earn a total of  134.00  from holding Brookfield Renewable Partners or generate 6.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	60.53%
Values	Daily Returns

Brookfield Renewable Partners  vs.  VERBUND AG

Brookfield Renewable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookfield Renewable Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Brookfield Renewable is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

VERBUND AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VERBUND AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Brookfield Renewable and VERBUND AG

The main advantage of trading using opposite Brookfield Renewable and VERBUND AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Renewable position performs unexpectedly, VERBUND AG 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 VERBUND AG will offset losses from the drop in VERBUND AG's long position.

The idea behind Brookfield Renewable Partners and VERBUND AG 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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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.