Correlation Between Algonquin Power and BROADWIND ENRGY
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and BROADWIND ENRGY 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 BROADWIND ENRGY 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 BROADWIND ENRGY, you can compare the effects of market volatilities on Algonquin Power and BROADWIND ENRGY 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 BROADWIND ENRGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and BROADWIND ENRGY.
Diversification Opportunities for Algonquin Power and BROADWIND ENRGY
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Algonquin and BROADWIND is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and BROADWIND ENRGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BROADWIND ENRGY 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 BROADWIND ENRGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BROADWIND ENRGY has no effect on the direction of Algonquin Power i.e., Algonquin Power and BROADWIND ENRGY go up and down completely randomly.
Pair Corralation between Algonquin Power and BROADWIND ENRGY
Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the BROADWIND ENRGY. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 2.23 times less risky than BROADWIND ENRGY. The stock trades about -0.03 of its potential returns per unit of risk. The BROADWIND ENRGY is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 168.00 in BROADWIND ENRGY on October 11, 2024 and sell it today you would earn a total of 20.00 from holding BROADWIND ENRGY or generate 11.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. BROADWIND ENRGY
Performance |
| Timeline |
| Algonquin Power Utilities |
| BROADWIND ENRGY |
Algonquin Power and BROADWIND ENRGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and BROADWIND ENRGY
The main advantage of trading using opposite Algonquin Power and BROADWIND ENRGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, BROADWIND ENRGY 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 BROADWIND ENRGY will offset losses from the drop in BROADWIND ENRGY's long position.| Algonquin Power vs. SOGECLAIR SA INH | Algonquin Power vs. INDOFOOD AGRI RES | Algonquin Power vs. GWILLI FOOD | Algonquin Power vs. SEALED AIR |
| BROADWIND ENRGY vs. Algonquin Power Utilities | BROADWIND ENRGY vs. FONIX MOBILE PLC | BROADWIND ENRGY vs. Zoom Video Communications | BROADWIND ENRGY vs. MOBILE FACTORY INC |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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