Correlation Between Light Wonder and Brookfield Renewable

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

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

Diversification Opportunities for Light Wonder and Brookfield Renewable

0.48

Correlation Coefficient

Light Wonder  Brookfield Renewable

Very weak diversification

The 3 months correlation between Light and Brookfield is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Light Wonder and Brookfield Renewable Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Renewable and Light Wonder 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 Light Wonder 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 has no effect on the direction of Light Wonder i.e., Light Wonder and Brookfield Renewable go up and down completely randomly.

Pair Corralation between Light Wonder and Brookfield Renewable

Considering the 90-day investment horizon Light Wonder is expected to generate 0.83 times more return on investment than Brookfield Renewable. However, Light Wonder is 1.21 times less risky than Brookfield Renewable. It trades about 0.1 of its potential returns per unit of risk. Brookfield Renewable Partners is currently generating about 0.0 per unit of risk. If you would invest  5,858  in Light Wonder on June 22, 2024 and sell it today you would earn a total of  5,340  from holding Light Wonder or generate 91.16% return on investment over 90 days.

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

Light Wonder  vs.  Brookfield Renewable Partners

Light Wonder

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Light Wonder are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Light Wonder may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Brookfield Renewable

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Renewable Partners are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Brookfield Renewable is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Light Wonder and Brookfield Renewable

The main advantage of trading using opposite Light Wonder and Brookfield Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Light Wonder 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 Light Wonder and Brookfield Renewable Partners 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.