Correlation Between Algonquin Power and Capital Power
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Capital Power 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 Capital Power 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 Capital Power, you can compare the effects of market volatilities on Algonquin Power and Capital Power 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 Capital Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Capital Power.
Diversification Opportunities for Algonquin Power and Capital Power
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Algonquin and Capital is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Capital Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Power 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 Capital Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Power has no effect on the direction of Algonquin Power i.e., Algonquin Power and Capital Power go up and down completely randomly.
Pair Corralation between Algonquin Power and Capital Power
Assuming the 90 days trading horizon Algonquin Power Utilities is expected to generate 0.45 times more return on investment than Capital Power. However, Algonquin Power Utilities is 2.23 times less risky than Capital Power. It trades about -0.02 of its potential returns per unit of risk. Capital Power is currently generating about -0.18 per unit of risk. If you would invest 654.00 in Algonquin Power Utilities on November 3, 2024 and sell it today you would lose (7.00) from holding Algonquin Power Utilities or give up 1.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. Capital Power
Performance |
| Timeline |
| Algonquin Power Utilities |
| Capital Power |
Algonquin Power and Capital Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Capital Power
The main advantage of trading using opposite Algonquin Power and Capital Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Capital Power 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 Capital Power will offset losses from the drop in Capital Power's long position.| Algonquin Power vs. Fortis Inc | Algonquin Power vs. Enbridge | Algonquin Power vs. Telus Corp | Algonquin Power vs. Brookfield Renewable Partners |
| Capital Power vs. Canadian Utilities Limited | Capital Power vs. Emera Inc | Capital Power vs. Keyera Corp | Capital Power vs. Northland Power |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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