Correlation Between Algonquin Power and Solution Financial
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Solution Financial 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 Solution Financial 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 Solution Financial, you can compare the effects of market volatilities on Algonquin Power and Solution Financial 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 Solution Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Solution Financial.
Diversification Opportunities for Algonquin Power and Solution Financial
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Algonquin and Solution is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial 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 Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of Algonquin Power i.e., Algonquin Power and Solution Financial go up and down completely randomly.
Pair Corralation between Algonquin Power and Solution Financial
Assuming the 90 days trading horizon Algonquin Power Utilities is expected to generate 0.33 times more return on investment than Solution Financial. However, Algonquin Power Utilities is 3.0 times less risky than Solution Financial. It trades about 0.35 of its potential returns per unit of risk. Solution Financial is currently generating about 0.1 per unit of risk. If you would invest 2,319 in Algonquin Power Utilities on September 21, 2024 and sell it today you would earn a total of 106.00 from holding Algonquin Power Utilities or generate 4.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. Solution Financial
Performance |
| Timeline |
| Algonquin Power Utilities |
| Solution Financial |
Algonquin Power and Solution Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Solution Financial
The main advantage of trading using opposite Algonquin Power and Solution Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Solution Financial 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 Solution Financial will offset losses from the drop in Solution Financial's 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 |
| Solution Financial vs. Algonquin Power Utilities | Solution Financial vs. Ramp Metals | Solution Financial vs. Quorum Information Technologies | Solution Financial vs. Dream Industrial Real |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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