Correlation Between Algonquin Power and Fortescue Metals
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Fortescue Metals 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 Fortescue Metals 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 Fortescue Metals Group, you can compare the effects of market volatilities on Algonquin Power and Fortescue Metals 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 Fortescue Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Fortescue Metals.
Diversification Opportunities for Algonquin Power and Fortescue Metals
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Algonquin and Fortescue is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals 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 Fortescue Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of Algonquin Power i.e., Algonquin Power and Fortescue Metals go up and down completely randomly.
Pair Corralation between Algonquin Power and Fortescue Metals
Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the Fortescue Metals. In addition to that, Algonquin Power is 1.06 times more volatile than Fortescue Metals Group. It trades about -0.08 of its total potential returns per unit of risk. Fortescue Metals Group is currently generating about 0.15 per unit of volatility. If you would invest 1,103 in Fortescue Metals Group on November 7, 2024 and sell it today you would earn a total of 57.00 from holding Fortescue Metals Group or generate 5.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Algonquin Power Utilities vs. Fortescue Metals Group
Performance |
| Timeline |
| Algonquin Power Utilities |
| Fortescue Metals |
Algonquin Power and Fortescue Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Fortescue Metals
The main advantage of trading using opposite Algonquin Power and Fortescue Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Fortescue Metals 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 Fortescue Metals will offset losses from the drop in Fortescue Metals' long position.| Algonquin Power vs. PLAYTECH | Algonquin Power vs. SALESFORCE INC CDR | Algonquin Power vs. Salesforce | Algonquin Power vs. The Trade Desk |
| Fortescue Metals vs. Transport International Holdings | Fortescue Metals vs. Broadcom | Fortescue Metals vs. NAGOYA RAILROAD | Fortescue Metals vs. VARIOUS EATERIES LS |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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