Correlation Between Orsted A/S and Clearway Energy

Can any of the company-specific risk be diversified away by investing in both Orsted A/S and Clearway Energy 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 Orsted A/S and Clearway Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Orsted AS and Clearway Energy, you can compare the effects of market volatilities on Orsted A/S and Clearway Energy 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 Orsted A/S with a short position of Clearway Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orsted A/S and Clearway Energy.

Diversification Opportunities for Orsted A/S and Clearway Energy

0.62

Correlation Coefficient

Orsted A/S  Clearway Energy

Poor diversification

The 3 months correlation between Orsted and Clearway is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Orsted AS and Clearway Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearway Energy and Orsted A/S 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 Orsted AS are associated (or correlated) with Clearway Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearway Energy has no effect on the direction of Orsted A/S i.e., Orsted A/S and Clearway Energy go up and down completely randomly.

Pair Corralation between Orsted A/S and Clearway Energy

Assuming the 90 days horizon Orsted A/S is expected to generate 1.33 times less return on investment than Clearway Energy. In addition to that, Orsted A/S is 2.25 times more volatile than Clearway Energy. It trades about 0.02 of its total potential returns per unit of risk. Clearway Energy is currently generating about 0.07 per unit of volatility. If you would invest  2,431  in Clearway Energy on January 5, 2025 and sell it today you would earn a total of  190.00  from holding Clearway Energy or generate 7.82% return on investment over 90 days.

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

Orsted AS  vs.  Clearway Energy

Orsted A/S

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orsted AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Orsted A/S may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Clearway Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Clearway Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Clearway Energy may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Orsted A/S and Clearway Energy

The main advantage of trading using opposite Orsted A/S and Clearway Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orsted A/S position performs unexpectedly, Clearway Energy 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 Clearway Energy will offset losses from the drop in Clearway Energy's long position.

The idea behind Orsted AS and Clearway 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.