Correlation Between Algonquin Power and Union Pacific
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Union Pacific 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 Union Pacific 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 Union Pacific, you can compare the effects of market volatilities on Algonquin Power and Union Pacific 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 Union Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Union Pacific.
Diversification Opportunities for Algonquin Power and Union Pacific
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Algonquin and Union is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Union Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Pacific 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 Union Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Pacific has no effect on the direction of Algonquin Power i.e., Algonquin Power and Union Pacific go up and down completely randomly.
Pair Corralation between Algonquin Power and Union Pacific
Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the Union Pacific. In addition to that, Algonquin Power is 1.53 times more volatile than Union Pacific. It trades about -0.04 of its total potential returns per unit of risk. Union Pacific is currently generating about 0.02 per unit of volatility. If you would invest 21,451 in Union Pacific on September 14, 2024 and sell it today you would earn a total of 819.00 from holding Union Pacific or generate 3.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Algonquin Power Utilities vs. Union Pacific
Performance |
| Timeline |
| Algonquin Power Utilities |
| Union Pacific |
Algonquin Power and Union Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Union Pacific
The main advantage of trading using opposite Algonquin Power and Union Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Union Pacific 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 Union Pacific will offset losses from the drop in Union Pacific's long position.| Algonquin Power vs. Superior Plus Corp | Algonquin Power vs. SIVERS SEMICONDUCTORS AB | Algonquin Power vs. Norsk Hydro ASA | Algonquin Power vs. Reliance Steel Aluminum |
| Union Pacific vs. WILLIS LEASE FIN | Union Pacific vs. Aozora Bank | Union Pacific vs. BANKINTER ADR 2007 | Union Pacific vs. CITY OFFICE REIT |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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