Correlation Between Boralex and Brookfield Renewable

Can any of the company-specific risk be diversified away by investing in both Boralex 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 Boralex and Brookfield Renewable into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boralex and Brookfield Renewable Corp, you can compare the effects of market volatilities on Boralex 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 Boralex with a short position of Brookfield Renewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boralex and Brookfield Renewable.

Diversification Opportunities for Boralex and Brookfield Renewable

0.55

Correlation Coefficient

Boralex  Brookfield Renewable

Very weak diversification

The 3 months correlation between Boralex and Brookfield is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Boralex and Brookfield Renewable Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Renewable Corp and Boralex 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 Boralex 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 Corp has no effect on the direction of Boralex i.e., Boralex and Brookfield Renewable go up and down completely randomly.

Pair Corralation between Boralex and Brookfield Renewable

Assuming the 90 days trading horizon Boralex is expected to generate 5.77 times less return on investment than Brookfield Renewable. But when comparing it to its historical volatility, Boralex is 1.38 times less risky than Brookfield Renewable. It trades about 0.05 of its potential returns per unit of risk. Brookfield Renewable Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,939  in Brookfield Renewable Corp on May 1, 2025 and sell it today you would earn a total of  1,130  from holding Brookfield Renewable Corp or generate 28.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Boralex  vs.  Brookfield Renewable Corp

Boralex

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Boralex are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Boralex is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Brookfield Renewable Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Renewable Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brookfield Renewable displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boralex and Brookfield Renewable

The main advantage of trading using opposite Boralex and Brookfield Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boralex 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 Boralex and Brookfield Renewable Corp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.