Correlation Between Algonquin Power and Exco Technologies
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Exco Technologies 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 Exco Technologies 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 Exco Technologies Limited, you can compare the effects of market volatilities on Algonquin Power and Exco Technologies 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 Exco Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Exco Technologies.
Diversification Opportunities for Algonquin Power and Exco Technologies
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Algonquin and Exco is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Exco Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exco Technologies 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 Exco Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exco Technologies has no effect on the direction of Algonquin Power i.e., Algonquin Power and Exco Technologies go up and down completely randomly.
Pair Corralation between Algonquin Power and Exco Technologies
Assuming the 90 days trading horizon Algonquin Power Utilities is expected to under-perform the Exco Technologies. In addition to that, Algonquin Power is 1.29 times more volatile than Exco Technologies Limited. It trades about -0.08 of its total potential returns per unit of risk. Exco Technologies Limited is currently generating about 0.08 per unit of volatility. If you would invest 714.00 in Exco Technologies Limited on September 3, 2024 and sell it today you would earn a total of 114.00 from holding Exco Technologies Limited or generate 15.97% 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. Exco Technologies Limited
Performance |
| Timeline |
| Algonquin Power Utilities |
| Exco Technologies |
Algonquin Power and Exco Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Exco Technologies
The main advantage of trading using opposite Algonquin Power and Exco Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Exco Technologies 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 Exco Technologies will offset losses from the drop in Exco Technologies' long position.| Algonquin Power vs. Fortis Inc | Algonquin Power vs. Enbridge | Algonquin Power vs. Telus Corp | Algonquin Power vs. Brookfield Renewable Partners |
| Exco Technologies vs. Transcontinental | Exco Technologies vs. Methanex | Exco Technologies vs. Stella Jones | Exco Technologies vs. High Liner Foods |
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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