Correlation Between Algonquin Power and Renew Energy
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Renew Energy 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 Renew Energy 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 Renew Energy Global, you can compare the effects of market volatilities on Algonquin Power and Renew Energy 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 Renew Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Renew Energy.
Diversification Opportunities for Algonquin Power and Renew Energy
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Algonquin and Renew is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Renew Energy Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renew Energy Global 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 Renew Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renew Energy Global has no effect on the direction of Algonquin Power i.e., Algonquin Power and Renew Energy go up and down completely randomly.
Pair Corralation between Algonquin Power and Renew Energy
Considering the 90-day investment horizon Algonquin Power Utilities is expected to under-perform the Renew Energy. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 1.62 times less risky than Renew Energy. The stock trades about -0.09 of its potential returns per unit of risk. The Renew Energy Global is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 596.00 in Renew Energy Global on August 27, 2024 and sell it today you would earn a total of 17.00 from holding Renew Energy Global or generate 2.85% 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. Renew Energy Global
Performance |
| Timeline |
| Algonquin Power Utilities |
| Renew Energy Global |
Algonquin Power and Renew Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and Renew Energy
The main advantage of trading using opposite Algonquin Power and Renew Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Renew Energy 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 Renew Energy will offset losses from the drop in Renew Energy'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 |
| Renew Energy vs. Fusion Fuel Green | Renew Energy vs. Advent Technologies Holdings | Renew Energy vs. Eos Energy Enterprises | Renew Energy vs. CuriosityStream |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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