Correlation Between Algonquin Power and KAUFMAN ET
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and KAUFMAN ET 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 KAUFMAN ET 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 KAUFMAN ET BROAD, you can compare the effects of market volatilities on Algonquin Power and KAUFMAN ET 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 KAUFMAN ET. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and KAUFMAN ET.
Diversification Opportunities for Algonquin Power and KAUFMAN ET
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Algonquin and KAUFMAN is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and KAUFMAN ET BROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAUFMAN ET BROAD 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 KAUFMAN ET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAUFMAN ET BROAD has no effect on the direction of Algonquin Power i.e., Algonquin Power and KAUFMAN ET go up and down completely randomly.
Pair Corralation between Algonquin Power and KAUFMAN ET
Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the KAUFMAN ET. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 1.01 times less risky than KAUFMAN ET. The stock trades about -0.01 of its potential returns per unit of risk. The KAUFMAN ET BROAD is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,360 in KAUFMAN ET BROAD on August 30, 2024 and sell it today you would earn a total of 795.00 from holding KAUFMAN ET BROAD or generate 33.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. KAUFMAN ET BROAD
Performance |
| Timeline |
| Algonquin Power Utilities |
| KAUFMAN ET BROAD |
Algonquin Power and KAUFMAN ET Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and KAUFMAN ET
The main advantage of trading using opposite Algonquin Power and KAUFMAN ET positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, KAUFMAN ET 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 KAUFMAN ET will offset losses from the drop in KAUFMAN ET's long position.| Algonquin Power vs. Superior Plus Corp | Algonquin Power vs. SIVERS SEMICONDUCTORS AB | Algonquin Power vs. Identiv | Algonquin Power vs. Intel |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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