Correlation Between APPLIED MATERIALS and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS 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 APPLIED MATERIALS and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and Algonquin Power Utilities, you can compare the effects of market volatilities on APPLIED MATERIALS 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 APPLIED MATERIALS with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and Algonquin Power.
Diversification Opportunities for APPLIED MATERIALS and Algonquin Power
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between APPLIED and Algonquin is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS i.e., APPLIED MATERIALS and Algonquin Power go up and down completely randomly.
Pair Corralation between APPLIED MATERIALS and Algonquin Power
Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.48 times more return on investment than Algonquin Power. However, APPLIED MATERIALS is 1.48 times more volatile than Algonquin Power Utilities. It trades about -0.03 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about -0.06 per unit of risk. If you would invest 19,850 in APPLIED MATERIALS on August 31, 2024 and sell it today you would lose (3,318) from holding APPLIED MATERIALS or give up 16.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
APPLIED MATERIALS vs. Algonquin Power Utilities
Performance |
| Timeline |
| APPLIED MATERIALS |
| Algonquin Power Utilities |
APPLIED MATERIALS and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APPLIED MATERIALS and Algonquin Power
The main advantage of trading using opposite APPLIED MATERIALS and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS 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.| APPLIED MATERIALS vs. Goodyear Tire Rubber | APPLIED MATERIALS vs. Entravision Communications | APPLIED MATERIALS vs. SBA Communications Corp | APPLIED MATERIALS vs. Ribbon Communications |
| Algonquin Power vs. Superior Plus Corp | Algonquin Power vs. NMI Holdings | Algonquin Power vs. Origin Agritech | Algonquin Power vs. SIVERS SEMICONDUCTORS AB |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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