Correlation Between Renew Energy and Constellation Energy

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

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

Diversification Opportunities for Renew Energy and Constellation Energy

0.74

Correlation Coefficient

Renew Energy  Constellation Energy

Poor diversification

The 3 months correlation between Renew and Constellation is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Renew Energy Global and Constellation Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Energy Corp and Renew Energy 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 Renew Energy Global are associated (or correlated) with Constellation Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Energy Corp has no effect on the direction of Renew Energy i.e., Renew Energy and Constellation Energy go up and down completely randomly.

Pair Corralation between Renew Energy and Constellation Energy

Considering the 90-day investment horizon Renew Energy is expected to generate 1.74 times less return on investment than Constellation Energy. But when comparing it to its historical volatility, Renew Energy Global is 1.21 times less risky than Constellation Energy. It trades about 0.15 of its potential returns per unit of risk. Constellation Energy Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  24,793  in Constellation Energy Corp on May 5, 2025 and sell it today you would earn a total of  9,284  from holding Constellation Energy Corp or generate 37.45% return on investment over 90 days.

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

Renew Energy Global  vs.  Constellation Energy Corp

Renew Energy Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Renew Energy Global are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Renew Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Constellation Energy Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Energy Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Constellation Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Renew Energy and Constellation Energy

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

The idea behind Renew Energy Global and Constellation Energy 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..