We’re always on the look-out for new and different market risk factors or betas here at the AllAboutAlpha global headquarters.  So with all the talk recently about alternative energy (such as a session at this Toronto energy conference next week hosted by AllAboutAlpha media partner Lipper HedgeWorld), we started wondering if there was actually a market risk factor associated with so-called “clean energy” companies that was separate and distinct from the energy factor itself.

We found this article in Forbes late last month exemplified the general level of excitement about alternative energy.  It cites impressive YTD growth of several alternative energy ETFs such as the US$660 million PowerShares WilderHill Clean Energy ETF (PBW).  This makes immediate sense.  After all, clean energy is the next big thing, right?

It turns out that PBW daily returns have a 64% correlation to the S&P Energy Select SPDRs (XLE), an ETF containing old-fashioned energy companies (calculated using data available at Google Finance).  That’s not really that high.  Here’s what the one year scatter plot of PBW and XLE daily returns looks like:

More…