Correlation Between Algonquin Power and Hercules Metals
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Hercules Metals 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 Hercules Metals 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 Hercules Metals Corp, you can compare the effects of market volatilities on Algonquin Power and Hercules Metals 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 Hercules Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Hercules Metals.
Diversification Opportunities for Algonquin Power and Hercules Metals
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Algonquin and Hercules is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Hercules Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Metals Corp 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 Hercules Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hercules Metals Corp has no effect on the direction of Algonquin Power i.e., Algonquin Power and Hercules Metals go up and down completely randomly.
Pair Corralation between Algonquin Power and Hercules Metals
Assuming the 90 days trading horizon Algonquin Power Utilities is expected to under-perform the Hercules Metals. But the preferred stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 8.7 times less risky than Hercules Metals. The preferred stock trades about -0.18 of its potential returns per unit of risk. The Hercules Metals Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 56.00 in Hercules Metals Corp on November 27, 2024 and sell it today you would earn a total of 10.00 from holding Hercules Metals Corp or generate 17.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. Hercules Metals Corp
Performance |
| Timeline |
| Algonquin Power Utilities |
| Hercules Metals Corp |
Algonquin Power and Hercules Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Hercules Metals
The main advantage of trading using opposite Algonquin Power and Hercules Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Hercules Metals 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 Hercules Metals will offset losses from the drop in Hercules Metals' long position.| Algonquin Power vs. Wishpond Technologies | Algonquin Power vs. Quorum Information Technologies | Algonquin Power vs. Firan Technology Group | Algonquin Power vs. Sparx Technology |
| Hercules Metals vs. Summa Silver Corp | Hercules Metals vs. XXIX Metal Corp | Hercules Metals vs. Globex Mining Enterprises | Hercules Metals vs. Endeavour Silver Corp |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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