Correlation Between ATCO and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both ATCO and Algonquin 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 Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATCO and Algonquin Power Utilities, you can compare the effects of market volatilities on ATCO and Algonquin 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 Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATCO and Algonquin Power.
Diversification Opportunities for ATCO and Algonquin Power
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ATCO and Algonquin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ATCO and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities 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 Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of ATCO i.e., ATCO and Algonquin Power go up and down completely randomly.
Pair Corralation between ATCO and Algonquin Power
Assuming the 90 days trading horizon ATCO is expected to under-perform the Algonquin Power. But the stock apears to be less risky and, when comparing its historical volatility, ATCO is 1.69 times less risky than Algonquin Power. The stock trades about -0.07 of its potential returns per unit of risk. The Algonquin Power Utilities is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 654.00 in Algonquin Power Utilities on November 3, 2024 and sell it today you would lose (7.00) from holding Algonquin Power Utilities or give up 1.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ATCO vs. Algonquin Power Utilities
Performance |
| Timeline |
| ATCO |
| Algonquin Power Utilities |
ATCO and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATCO and Algonquin Power
The main advantage of trading using opposite ATCO and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATCO position performs unexpectedly, Algonquin 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 Algonquin Power will offset losses from the drop in Algonquin Power's long position.| ATCO vs. Canadian Utilities Limited | ATCO vs. Emera Inc | ATCO vs. Capital Power | ATCO vs. Transcontinental |
| Algonquin Power vs. Fortis Inc | Algonquin Power vs. Enbridge | Algonquin Power vs. Telus Corp | Algonquin Power vs. Brookfield Renewable Partners |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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