Correlation Between Algonquin Power and Dream Office
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Dream Office 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 Dream Office 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 Dream Office Real, you can compare the effects of market volatilities on Algonquin Power and Dream Office 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 Dream Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Dream Office.
Diversification Opportunities for Algonquin Power and Dream Office
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Algonquin and Dream is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Dream Office Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Office Real 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 Dream Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Office Real has no effect on the direction of Algonquin Power i.e., Algonquin Power and Dream Office go up and down completely randomly.
Pair Corralation between Algonquin Power and Dream Office
Assuming the 90 days trading horizon Algonquin Power Utilities is expected to generate 0.67 times more return on investment than Dream Office. However, Algonquin Power Utilities is 1.5 times less risky than Dream Office. It trades about -0.01 of its potential returns per unit of risk. Dream Office Real is currently generating about -0.04 per unit of risk. If you would invest 858.00 in Algonquin Power Utilities on September 3, 2024 and sell it today you would lose (163.00) from holding Algonquin Power Utilities or give up 19.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. Dream Office Real
Performance |
| Timeline |
| Algonquin Power Utilities |
| Dream Office Real |
Algonquin Power and Dream Office Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Dream Office
The main advantage of trading using opposite Algonquin Power and Dream Office positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Dream Office 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 Dream Office will offset losses from the drop in Dream Office's long position.| Algonquin Power vs. Fortis Inc | Algonquin Power vs. Enbridge | Algonquin Power vs. Telus Corp | Algonquin Power vs. Brookfield Renewable Partners |
| Dream Office vs. KDA Group | Dream Office vs. BMO Aggregate Bond | Dream Office vs. Terreno Resources Corp | Dream Office vs. iShares Canadian HYBrid |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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