Correlation Between Algonquin Power and Ormat Technologies
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Ormat 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 Ormat 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 Ormat Technologies, you can compare the effects of market volatilities on Algonquin Power and Ormat 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 Ormat Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Ormat Technologies.
Diversification Opportunities for Algonquin Power and Ormat Technologies
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Algonquin and Ormat is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Ormat Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ormat 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 Ormat Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ormat Technologies has no effect on the direction of Algonquin Power i.e., Algonquin Power and Ormat Technologies go up and down completely randomly.
Pair Corralation between Algonquin Power and Ormat Technologies
Considering the 90-day investment horizon Algonquin Power Utilities is expected to generate 1.21 times more return on investment than Ormat Technologies. However, Algonquin Power is 1.21 times more volatile than Ormat Technologies. It trades about 0.26 of its potential returns per unit of risk. Ormat Technologies is currently generating about -0.19 per unit of risk. If you would invest 441.00 in Algonquin Power Utilities on November 18, 2024 and sell it today you would earn a total of 43.00 from holding Algonquin Power Utilities or generate 9.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. Ormat Technologies
Performance |
| Timeline |
| Algonquin Power Utilities |
| Ormat Technologies |
Algonquin Power and Ormat Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Ormat Technologies
The main advantage of trading using opposite Algonquin Power and Ormat Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Ormat 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 Ormat Technologies will offset losses from the drop in Ormat Technologies' long position.| Algonquin Power vs. Brookfield Renewable Corp | Algonquin Power vs. Clearway Energy Class | Algonquin Power vs. Clearway Energy | Algonquin Power vs. Brookfield Renewable Partners |
| Ormat Technologies vs. Altus Power | Ormat Technologies vs. Enlight Renewable Energy | Ormat Technologies vs. Fluence Energy | Ormat Technologies vs. Clearway Energy |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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