Correlation Between Atco and EuroSite Power
Can any of the company-specific risk be diversified away by investing in both Atco and EuroSite Power 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 Atco and EuroSite Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Atco and EuroSite Power, you can compare the effects of market volatilities on Atco and EuroSite Power 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 Atco with a short position of EuroSite Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atco and EuroSite Power.
Diversification Opportunities for Atco and EuroSite Power
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Atco and EuroSite is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Atco and EuroSite Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuroSite Power and Atco 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 Atco are associated (or correlated) with EuroSite Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EuroSite Power has no effect on the direction of Atco i.e., Atco and EuroSite Power go up and down completely randomly.
Pair Corralation between Atco and EuroSite Power
Assuming the 90 days horizon Atco is expected to generate 5.53 times less return on investment than EuroSite Power. But when comparing it to its historical volatility, Atco is 8.56 times less risky than EuroSite Power. It trades about 0.08 of its potential returns per unit of risk. EuroSite Power is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4.00 in EuroSite Power on September 12, 2024 and sell it today you would earn a total of 1.00 from holding EuroSite Power or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.67% |
| Values | Daily Returns |
Atco vs. EuroSite Power
Performance |
| Timeline |
| Atco |
| EuroSite Power |
Atco and EuroSite Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Atco and EuroSite Power
The main advantage of trading using opposite Atco and EuroSite Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atco position performs unexpectedly, EuroSite Power 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 EuroSite Power will offset losses from the drop in EuroSite Power's long position.The idea behind Atco and EuroSite Power pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| EuroSite Power vs. Atco | EuroSite Power vs. Canadian Utilities Limited | EuroSite Power vs. Engie SA ADR | EuroSite Power vs. The AES |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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