Correlation Between Algonquin Power and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Spirent Communications 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 Spirent Communications 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 Spirent Communications plc, you can compare the effects of market volatilities on Algonquin Power and Spirent Communications 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 Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Spirent Communications.
Diversification Opportunities for Algonquin Power and Spirent Communications
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Algonquin and Spirent is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications 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 Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of Algonquin Power i.e., Algonquin Power and Spirent Communications go up and down completely randomly.
Pair Corralation between Algonquin Power and Spirent Communications
Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the Spirent Communications. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 2.41 times less risky than Spirent Communications. The stock trades about -0.04 of its potential returns per unit of risk. The Spirent Communications plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 140.00 in Spirent Communications plc on October 26, 2024 and sell it today you would earn a total of 60.00 from holding Spirent Communications plc or generate 42.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. Spirent Communications plc
Performance |
| Timeline |
| Algonquin Power Utilities |
| Spirent Communications |
Algonquin Power and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Spirent Communications
The main advantage of trading using opposite Algonquin Power and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Spirent Communications 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 Spirent Communications will offset losses from the drop in Spirent Communications' long position.| Algonquin Power vs. Orsted AS | Algonquin Power vs. NRG Energy | Algonquin Power vs. Northland Power | Algonquin Power vs. Superior Plus Corp |
| Spirent Communications vs. United Utilities Group | Spirent Communications vs. SBM OFFSHORE | Spirent Communications vs. Algonquin Power Utilities | Spirent Communications vs. UNIQA INSURANCE GR |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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