Correlation Between Algonquin Power and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Summit Materials 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 Summit Materials 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 Summit Materials, you can compare the effects of market volatilities on Algonquin Power and Summit Materials 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 Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Summit Materials.
Diversification Opportunities for Algonquin Power and Summit Materials
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Algonquin and Summit is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Algonquin Power i.e., Algonquin Power and Summit Materials go up and down completely randomly.
Pair Corralation between Algonquin Power and Summit Materials
Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the Summit Materials. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 1.12 times less risky than Summit Materials. The stock trades about -0.1 of its potential returns per unit of risk. The Summit Materials is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,660 in Summit Materials on October 25, 2024 and sell it today you would earn a total of 1,340 from holding Summit Materials or generate 36.61% 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. Summit Materials
Performance |
| Timeline |
| Algonquin Power Utilities |
| Summit Materials |
Algonquin Power and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Summit Materials
The main advantage of trading using opposite Algonquin Power and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Summit Materials 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 Summit Materials will offset losses from the drop in Summit Materials' long position.| Algonquin Power vs. Orsted AS | Algonquin Power vs. NRG Energy | Algonquin Power vs. Northland Power | Algonquin Power vs. Superior Plus Corp |
| Summit Materials vs. ANGANG STEEL H | Summit Materials vs. United Rentals | Summit Materials vs. ELL ENVIRONHLDGS HD 0001 | Summit Materials vs. Tianjin Capital Environmental |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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