Correlation Between Algonquin Power and Canadian Utilities
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Canadian Utilities 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 Canadian Utilities 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 Canadian Utilities Limited, you can compare the effects of market volatilities on Algonquin Power and Canadian Utilities 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 Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Canadian Utilities.
Diversification Opportunities for Algonquin Power and Canadian Utilities
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Algonquin and Canadian is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Canadian Utilities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities 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 Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of Algonquin Power i.e., Algonquin Power and Canadian Utilities go up and down completely randomly.
Pair Corralation between Algonquin Power and Canadian Utilities
Assuming the 90 days trading horizon Algonquin Power Utilities is expected to under-perform the Canadian Utilities. But the preferred stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 1.5 times less risky than Canadian Utilities. The preferred stock trades about -0.04 of its potential returns per unit of risk. The Canadian Utilities Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,560 in Canadian Utilities Limited on August 29, 2024 and sell it today you would earn a total of 11.00 from holding Canadian Utilities Limited or generate 0.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Algonquin Power Utilities vs. Canadian Utilities Limited
Performance |
| Timeline |
| Algonquin Power Utilities |
| Canadian Utilities |
Algonquin Power and Canadian Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Canadian Utilities
The main advantage of trading using opposite Algonquin Power and Canadian Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Canadian Utilities 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 Canadian Utilities will offset losses from the drop in Canadian Utilities' long position.| Algonquin Power vs. Forstrong Global Income | Algonquin Power vs. Terreno Resources Corp | Algonquin Power vs. iShares Canadian HYBrid | Algonquin Power vs. Brompton European Dividend |
| Canadian Utilities vs. Innergex Renewable Energy | Canadian Utilities vs. Northland Power | Canadian Utilities vs. Capital Power | Canadian Utilities 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 Stocks Directory module to find actively traded stocks across global markets.
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