Correlation Between Algonquin Power and Canadian Net
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Canadian Net 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 Canadian Net 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 Canadian Net Real, you can compare the effects of market volatilities on Algonquin Power and Canadian Net 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 Canadian Net. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Canadian Net.
Diversification Opportunities for Algonquin Power and Canadian Net
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Algonquin and Canadian is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Canadian Net Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Net 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 Canadian Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Net Real has no effect on the direction of Algonquin Power i.e., Algonquin Power and Canadian Net go up and down completely randomly.
Pair Corralation between Algonquin Power and Canadian Net
Assuming the 90 days trading horizon Algonquin Power Utilities is expected to generate 1.16 times more return on investment than Canadian Net. However, Algonquin Power is 1.16 times more volatile than Canadian Net Real. It trades about -0.11 of its potential returns per unit of risk. Canadian Net Real is currently generating about -0.18 per unit of risk. If you would invest 696.00 in Algonquin Power Utilities on August 29, 2024 and sell it today you would lose (25.00) from holding Algonquin Power Utilities or give up 3.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. Canadian Net Real
Performance |
| Timeline |
| Algonquin Power Utilities |
| Canadian Net Real |
Algonquin Power and Canadian Net Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Canadian Net
The main advantage of trading using opposite Algonquin Power and Canadian Net positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Canadian Net 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 Canadian Net will offset losses from the drop in Canadian Net's long position.| Algonquin Power vs. Fortis Inc | Algonquin Power vs. Enbridge | Algonquin Power vs. Telus Corp | Algonquin Power vs. Brookfield Renewable Partners |
| Canadian Net vs. SmartCentres Real Estate | Canadian Net vs. Dream Industrial Real | Canadian Net vs. RioCan Real Estate | Canadian Net 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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