Correlation Between Algonquin Power and DGTL Holdings
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and DGTL Holdings 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 DGTL Holdings 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 DGTL Holdings, you can compare the effects of market volatilities on Algonquin Power and DGTL Holdings 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 DGTL Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and DGTL Holdings.
Diversification Opportunities for Algonquin Power and DGTL Holdings
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Algonquin and DGTL is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and DGTL Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DGTL Holdings 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 DGTL Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DGTL Holdings has no effect on the direction of Algonquin Power i.e., Algonquin Power and DGTL Holdings go up and down completely randomly.
Pair Corralation between Algonquin Power and DGTL Holdings
Assuming the 90 days trading horizon Algonquin Power is expected to generate 46.17 times less return on investment than DGTL Holdings. But when comparing it to its historical volatility, Algonquin Power Utilities is 61.02 times less risky than DGTL Holdings. It trades about 0.1 of its potential returns per unit of risk. DGTL Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 15.00 in DGTL Holdings on September 12, 2024 and sell it today you would lose (10.50) from holding DGTL Holdings or give up 70.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. DGTL Holdings
Performance |
| Timeline |
| Algonquin Power Utilities |
| DGTL Holdings |
Algonquin Power and DGTL Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and DGTL Holdings
The main advantage of trading using opposite Algonquin Power and DGTL Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, DGTL Holdings 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 DGTL Holdings will offset losses from the drop in DGTL Holdings' long position.| Algonquin Power vs. Microsoft Corp CDR | Algonquin Power vs. Apple Inc CDR | Algonquin Power vs. Alphabet Inc CDR | Algonquin Power vs. Amazon CDR |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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