Correlation Between Algonquin Power and Innergex Renewable
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Innergex Renewable 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 Innergex Renewable 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 Innergex Renewable Energy, you can compare the effects of market volatilities on Algonquin Power and Innergex Renewable 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 Innergex Renewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Innergex Renewable.
Diversification Opportunities for Algonquin Power and Innergex Renewable
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Algonquin and Innergex is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Innergex Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innergex Renewable Energy 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 Innergex Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innergex Renewable Energy has no effect on the direction of Algonquin Power i.e., Algonquin Power and Innergex Renewable go up and down completely randomly.
Pair Corralation between Algonquin Power and Innergex Renewable
Assuming the 90 days trading horizon Algonquin Power Utilities is expected to generate 0.83 times more return on investment than Innergex Renewable. However, Algonquin Power Utilities is 1.21 times less risky than Innergex Renewable. It trades about -0.03 of its potential returns per unit of risk. Innergex Renewable Energy is currently generating about -0.04 per unit of risk. If you would invest 891.00 in Algonquin Power Utilities on August 27, 2024 and sell it today you would lose (226.00) from holding Algonquin Power Utilities or give up 25.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. Innergex Renewable Energy
Performance |
| Timeline |
| Algonquin Power Utilities |
| Innergex Renewable Energy |
Algonquin Power and Innergex Renewable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Innergex Renewable
The main advantage of trading using opposite Algonquin Power and Innergex Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Innergex Renewable 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 Innergex Renewable will offset losses from the drop in Innergex Renewable's long position.| Algonquin Power vs. Fortis Inc | Algonquin Power vs. Enbridge | Algonquin Power vs. Telus Corp | Algonquin Power vs. Brookfield Renewable Partners |
| Innergex Renewable vs. Boralex | Innergex Renewable vs. Capital Power | Innergex Renewable vs. Brookfield Renewable Partners |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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