Correlation Between Algonquin Power and Brookfield Infrastructure
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Brookfield Infrastructure 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 Brookfield Infrastructure 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 Brookfield Infrastructure Partners, you can compare the effects of market volatilities on Algonquin Power and Brookfield Infrastructure 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 Brookfield Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Brookfield Infrastructure.
Diversification Opportunities for Algonquin Power and Brookfield Infrastructure
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Algonquin and Brookfield is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Brookfield Infrastructure Part in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Infrastructure 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 Brookfield Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Infrastructure has no effect on the direction of Algonquin Power i.e., Algonquin Power and Brookfield Infrastructure go up and down completely randomly.
Pair Corralation between Algonquin Power and Brookfield Infrastructure
Assuming the 90 days trading horizon Algonquin Power Utilities is expected to under-perform the Brookfield Infrastructure. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 1.12 times less risky than Brookfield Infrastructure. The stock trades about -0.05 of its potential returns per unit of risk. The Brookfield Infrastructure Partners is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 4,618 in Brookfield Infrastructure Partners on August 28, 2024 and sell it today you would earn a total of 314.00 from holding Brookfield Infrastructure Partners or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. Brookfield Infrastructure Part
Performance |
| Timeline |
| Algonquin Power Utilities |
| Brookfield Infrastructure |
Algonquin Power and Brookfield Infrastructure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Brookfield Infrastructure
The main advantage of trading using opposite Algonquin Power and Brookfield Infrastructure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Brookfield Infrastructure 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 Brookfield Infrastructure will offset losses from the drop in Brookfield Infrastructure's long position.| Algonquin Power vs. Fortis Inc | Algonquin Power vs. Enbridge | Algonquin Power vs. Telus Corp | Algonquin Power vs. Brookfield Renewable Partners |
| Brookfield Infrastructure vs. Brookfield Renewable Partners | Brookfield Infrastructure vs. Emera Inc | Brookfield Infrastructure vs. Fortis Inc | Brookfield Infrastructure 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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