Correlation Between Algonquin Power and KGHM Polska
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and KGHM Polska 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 KGHM Polska 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 KGHM Polska Miedz, you can compare the effects of market volatilities on Algonquin Power and KGHM Polska 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 KGHM Polska. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and KGHM Polska.
Diversification Opportunities for Algonquin Power and KGHM Polska
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Algonquin and KGHM is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and KGHM Polska Miedz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KGHM Polska Miedz 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 KGHM Polska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KGHM Polska Miedz has no effect on the direction of Algonquin Power i.e., Algonquin Power and KGHM Polska go up and down completely randomly.
Pair Corralation between Algonquin Power and KGHM Polska
Assuming the 90 days horizon Algonquin Power Utilities is expected to generate 0.74 times more return on investment than KGHM Polska. However, Algonquin Power Utilities is 1.36 times less risky than KGHM Polska. It trades about -0.08 of its potential returns per unit of risk. KGHM Polska Miedz is currently generating about -0.39 per unit of risk. If you would invest 461.00 in Algonquin Power Utilities on August 24, 2024 and sell it today you would lose (14.00) from holding Algonquin Power Utilities or give up 3.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Algonquin Power Utilities vs. KGHM Polska Miedz
Performance |
| Timeline |
| Algonquin Power Utilities |
| KGHM Polska Miedz |
Algonquin Power and KGHM Polska Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and KGHM Polska
The main advantage of trading using opposite Algonquin Power and KGHM Polska positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, KGHM Polska 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 KGHM Polska will offset losses from the drop in KGHM Polska's long position.| Algonquin Power vs. Superior Plus Corp | Algonquin Power vs. NMI Holdings | Algonquin Power vs. Origin Agritech | Algonquin Power vs. SIVERS SEMICONDUCTORS AB |
| KGHM Polska vs. Algonquin Power Utilities | KGHM Polska vs. National Beverage Corp | KGHM Polska vs. ScanSource | KGHM Polska vs. SCANSOURCE |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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