Correlation Between Algonquin Power and AltaGas
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and AltaGas 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 AltaGas 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 AltaGas, you can compare the effects of market volatilities on Algonquin Power and AltaGas 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 AltaGas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and AltaGas.
Diversification Opportunities for Algonquin Power and AltaGas
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Algonquin and AltaGas is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and AltaGas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AltaGas 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 AltaGas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AltaGas has no effect on the direction of Algonquin Power i.e., Algonquin Power and AltaGas go up and down completely randomly.
Pair Corralation between Algonquin Power and AltaGas
Assuming the 90 days trading horizon Algonquin Power Utilities is expected to under-perform the AltaGas. In addition to that, Algonquin Power is 1.63 times more volatile than AltaGas. It trades about -0.01 of its total potential returns per unit of risk. AltaGas is currently generating about 0.08 per unit of volatility. If you would invest 2,268 in AltaGas on September 3, 2024 and sell it today you would earn a total of 1,156 from holding AltaGas or generate 50.97% 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. AltaGas
Performance |
| Timeline |
| Algonquin Power Utilities |
| AltaGas |
Algonquin Power and AltaGas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and AltaGas
The main advantage of trading using opposite Algonquin Power and AltaGas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, AltaGas 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 AltaGas will offset losses from the drop in AltaGas' long position.| Algonquin Power vs. Fortis Inc | Algonquin Power vs. Enbridge | Algonquin Power vs. Telus Corp | Algonquin Power vs. Brookfield Renewable Partners |
| AltaGas vs. Pembina Pipeline Corp | AltaGas vs. Keyera Corp | AltaGas vs. Emera Inc | AltaGas vs. Algonquin Power Utilities |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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