Correlation Between Azure Power and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both Azure Power and Algonquin Power 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 Azure Power and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Azure Power Global and Algonquin Power Utilities, you can compare the effects of market volatilities on Azure Power and Algonquin Power 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 Azure Power with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azure Power and Algonquin Power.
Diversification Opportunities for Azure Power and Algonquin Power
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Azure and Algonquin is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Azure Power Global and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities and Azure 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 Azure Power Global are associated (or correlated) with Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of Azure Power i.e., Azure Power and Algonquin Power go up and down completely randomly.
Pair Corralation between Azure Power and Algonquin Power
Given the investment horizon of 90 days Azure Power Global is expected to under-perform the Algonquin Power. In addition to that, Azure Power is 4.61 times more volatile than Algonquin Power Utilities. It trades about -0.12 of its total potential returns per unit of risk. Algonquin Power Utilities is currently generating about 0.0 per unit of volatility. If you would invest 2,010 in Algonquin Power Utilities on August 28, 2024 and sell it today you would lose (76.00) from holding Algonquin Power Utilities or give up 3.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 39.43% |
| Values | Daily Returns |
Azure Power Global vs. Algonquin Power Utilities
Performance |
| Timeline |
| Azure Power Global |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Algonquin Power Utilities |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Azure Power and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Azure Power and Algonquin Power
The main advantage of trading using opposite Azure Power and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Azure Power position performs unexpectedly, Algonquin Power 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 Algonquin Power will offset losses from the drop in Algonquin Power's long position.| Azure Power vs. Altus Power | Azure Power vs. Ormat Technologies | Azure Power vs. Enlight Renewable Energy | Azure Power vs. Fluence Energy |
| Algonquin Power vs. SiriusPoint | Algonquin Power vs. Brightspire Capital | Algonquin Power vs. RLJ Lodging Trust | Algonquin Power vs. Harrow Health 8625 |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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