Correlation Between Brookfield Renewable and Atlantica Sustainable

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

Diversification Opportunities for Brookfield Renewable and Atlantica Sustainable

-0.8

Correlation Coefficient

Brookfield Renewable  Atlantica Sustainable

Pay attention - limited upside

The 3 months correlation between Brookfield and Atlantica is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Partners and Atlantica Sustainable Infrastr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlantica Sustainable 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 Atlantica Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlantica Sustainable has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and Atlantica Sustainable go up and down completely randomly.

Pair Corralation between Brookfield Renewable and Atlantica Sustainable

Considering the 90-day investment horizon Brookfield Renewable Partners is expected to generate 1.26 times more return on investment than Atlantica Sustainable. However, Brookfield Renewable is 1.26 times more volatile than Atlantica Sustainable Infrastructure. It trades about 0.01 of its potential returns per unit of risk. Atlantica Sustainable Infrastructure is currently generating about 0.01 per unit of risk. If you would invest  2,363  in Brookfield Renewable Partners on September 23, 2024 and sell it today you would lose (68.00) from holding Brookfield Renewable Partners or give up 2.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.59%
Values	Daily Returns

Brookfield Renewable Partners  vs.  Atlantica Sustainable Infrastr

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. Even with unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Atlantica Sustainable

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Atlantica Sustainable Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Atlantica Sustainable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Brookfield Renewable and Atlantica Sustainable

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

The idea behind Brookfield Renewable Partners and Atlantica Sustainable Infrastructure 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.