Correlation Between Algonquin Power and Orsted A/S
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Orsted A/S 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 Orsted A/S 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 Orsted AS ADR, you can compare the effects of market volatilities on Algonquin Power and Orsted A/S 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 Orsted A/S. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Orsted A/S.
Diversification Opportunities for Algonquin Power and Orsted A/S
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Algonquin and Orsted is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Orsted AS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orsted AS ADR 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 Orsted A/S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orsted AS ADR has no effect on the direction of Algonquin Power i.e., Algonquin Power and Orsted A/S go up and down completely randomly.
Pair Corralation between Algonquin Power and Orsted A/S
Considering the 90-day investment horizon Algonquin Power Utilities is expected to under-perform the Orsted A/S. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 1.35 times less risky than Orsted A/S. The stock trades about -0.04 of its potential returns per unit of risk. The Orsted AS ADR is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 1,855 in Orsted AS ADR on November 9, 2024 and sell it today you would lose (473.00) from holding Orsted AS ADR or give up 25.5% 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. Orsted AS ADR
Performance |
| Timeline |
| Algonquin Power Utilities |
| Orsted AS ADR |
Algonquin Power and Orsted A/S Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Orsted A/S
The main advantage of trading using opposite Algonquin Power and Orsted A/S positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Orsted A/S 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 Orsted A/S will offset losses from the drop in Orsted A/S's long position.| Algonquin Power vs. Brookfield Renewable Corp | Algonquin Power vs. Nextera Energy Partners | Algonquin Power vs. Clearway Energy Class | Algonquin Power vs. Clearway Energy |
| Orsted A/S vs. Brookfield Renewable Partners | Orsted A/S vs. Brookfield Renewable Corp | Orsted A/S vs. Clearway Energy Class | Orsted A/S vs. Nextera Energy 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |