Correlation Between Algonquin Power and Summit Hotel
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Summit Hotel 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 Hotel 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 Hotel Properties, you can compare the effects of market volatilities on Algonquin Power and Summit Hotel 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 Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Summit Hotel.
Diversification Opportunities for Algonquin Power and Summit Hotel
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Algonquin and Summit is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Summit Hotel Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Hotel Properties 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 Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Hotel Properties has no effect on the direction of Algonquin Power i.e., Algonquin Power and Summit Hotel go up and down completely randomly.
Pair Corralation between Algonquin Power and Summit Hotel
Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the Summit Hotel. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 1.02 times less risky than Summit Hotel. The stock trades about -0.05 of its potential returns per unit of risk. The Summit Hotel Properties is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 590.00 in Summit Hotel Properties on September 1, 2024 and sell it today you would earn a total of 20.00 from holding Summit Hotel Properties or generate 3.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. Summit Hotel Properties
Performance |
| Timeline |
| Algonquin Power Utilities |
| Summit Hotel Properties |
Algonquin Power and Summit Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Summit Hotel
The main advantage of trading using opposite Algonquin Power and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Summit Hotel 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 Hotel will offset losses from the drop in Summit Hotel's long position.| Algonquin Power vs. Entravision Communications | Algonquin Power vs. CeoTronics AG | Algonquin Power vs. Ribbon Communications | Algonquin Power vs. INTERSHOP Communications Aktiengesellschaft |
| Summit Hotel vs. PennantPark Investment | Summit Hotel vs. Strategic Investments AS | Summit Hotel vs. HK Electric Investments | Summit Hotel vs. ELECTRONIC ARTS |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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