Correlation Between Algonquin Power and Allete
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Allete 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 Allete 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 Allete Inc, you can compare the effects of market volatilities on Algonquin Power and Allete 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 Allete. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Allete.
Diversification Opportunities for Algonquin Power and Allete
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Algonquin and Allete is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Allete Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allete Inc 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 Allete. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allete Inc has no effect on the direction of Algonquin Power i.e., Algonquin Power and Allete go up and down completely randomly.
Pair Corralation between Algonquin Power and Allete
Considering the 90-day investment horizon Algonquin Power Utilities is expected to under-perform the Allete. In addition to that, Algonquin Power is 1.65 times more volatile than Allete Inc. It trades about -0.02 of its total potential returns per unit of risk. Allete Inc is currently generating about 0.02 per unit of volatility. If you would invest 5,926 in Allete Inc on August 30, 2024 and sell it today you would earn a total of 561.00 from holding Allete Inc or generate 9.47% 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. Allete Inc
Performance |
| Timeline |
| Algonquin Power Utilities |
| Allete Inc |
Algonquin Power and Allete Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Allete
The main advantage of trading using opposite Algonquin Power and Allete positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Allete 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 Allete will offset losses from the drop in Allete's long position.| Algonquin Power vs. Brookfield Renewable Corp | Algonquin Power vs. Nextera Energy Partners | Algonquin Power vs. Clearway Energy Class | Algonquin Power vs. Atlantica Sustainable Infrastructure |
| Allete vs. Avista | Allete vs. Black Hills | Allete vs. Montauk Renewables | Allete vs. Companhia Paranaense de |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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