Finance
Correlation measures the statistical relationship between two assets' returns, ranging from -1 (perfectly inverse) to +1 (perfectly aligned). In portfolio construction, low or negative correlation between assets reduces overall portfolio volatility and risk. Renewable energy investments typically have low correlation with traditional stocks and bonds because their returns depend on energy demand, government incentives, and long-term PPAs rather than equity market sentiment. This low correlation is a key reason investors add renewable energy to diversified portfolios-when stock markets decline, renewable energy projects continue generating steady, contracted cash flows, providing portfolio stability and smoother returns over time.