Correlation Between Algonquin Power and North American
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and North American 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 North American 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 North American Financial, you can compare the effects of market volatilities on Algonquin Power and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and North American.
Diversification Opportunities for Algonquin Power and North American
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Algonquin and North is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Algonquin Power i.e., Algonquin Power and North American go up and down completely randomly.
Pair Corralation between Algonquin Power and North American
Assuming the 90 days trading horizon Algonquin Power Utilities is expected to under-perform the North American. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 1.33 times less risky than North American. The stock trades about -0.02 of its potential returns per unit of risk. The North American Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 430.00 in North American Financial on October 11, 2024 and sell it today you would earn a total of 274.00 from holding North American Financial or generate 63.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. North American Financial
Performance |
| Timeline |
| Algonquin Power Utilities |
| North American Financial |
Algonquin Power and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and North American
The main advantage of trading using opposite Algonquin Power and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| Algonquin Power vs. Fortis Inc | Algonquin Power vs. Enbridge | Algonquin Power vs. Telus Corp | Algonquin Power vs. Brookfield Renewable Partners |
| North American vs. Dividend Growth Split | North American vs. Dividend 15 Split | North American vs. Financial 15 Split | North American vs. Dividend 15 Split |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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