Correlation Between Algonquin Power and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Auto Trader 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 Algonquin Power and Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algonquin Power Utilities and Auto Trader Group, you can compare the effects of market volatilities on Algonquin Power and Auto Trader 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 Algonquin Power with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Auto Trader.
Diversification Opportunities for Algonquin Power and Auto Trader
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Algonquin and Auto is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and Algonquin Power 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 Algonquin Power Utilities are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Algonquin Power i.e., Algonquin Power and Auto Trader go up and down completely randomly.
Pair Corralation between Algonquin Power and Auto Trader
Assuming the 90 days horizon Algonquin Power Utilities is expected to generate 0.72 times more return on investment than Auto Trader. However, Algonquin Power Utilities is 1.4 times less risky than Auto Trader. It trades about 0.18 of its potential returns per unit of risk. Auto Trader Group is currently generating about -0.03 per unit of risk. If you would invest 439.00 in Algonquin Power Utilities on September 1, 2024 and sell it today you would earn a total of 25.00 from holding Algonquin Power Utilities or generate 5.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. Auto Trader Group
Performance |
| Timeline |
| Algonquin Power Utilities |
| Auto Trader Group |
Algonquin Power and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Auto Trader
The main advantage of trading using opposite Algonquin Power and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| Algonquin Power vs. Entravision Communications | Algonquin Power vs. CeoTronics AG | Algonquin Power vs. Ribbon Communications | Algonquin Power vs. INTERSHOP Communications Aktiengesellschaft |
| Auto Trader vs. FORMPIPE SOFTWARE AB | Auto Trader vs. UNITED UTILITIES GR | Auto Trader vs. COPLAND ROAD CAPITAL | Auto Trader vs. Algonquin Power Utilities |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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