Correlation Between BCE and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both BCE 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 BCE and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCE Inc and Algonquin Power Utilities, you can compare the effects of market volatilities on BCE 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 BCE with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and Algonquin Power.
Diversification Opportunities for BCE and Algonquin Power
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BCE and Algonquin is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc 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 BCE 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 BCE Inc 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 BCE i.e., BCE and Algonquin Power go up and down completely randomly.
Pair Corralation between BCE and Algonquin Power
Assuming the 90 days trading horizon BCE Inc is expected to under-perform the Algonquin Power. But the stock apears to be less risky and, when comparing its historical volatility, BCE Inc is 1.53 times less risky than Algonquin Power. The stock trades about -0.11 of its potential returns per unit of risk. The Algonquin Power Utilities is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 735.00 in Algonquin Power Utilities on November 2, 2024 and sell it today you would lose (88.00) from holding Algonquin Power Utilities or give up 11.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BCE Inc vs. Algonquin Power Utilities
Performance |
| Timeline |
| BCE Inc |
| Algonquin Power Utilities |
BCE and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BCE and Algonquin Power
The main advantage of trading using opposite BCE and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE 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.The idea behind BCE Inc and Algonquin Power Utilities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Algonquin Power vs. Fortis Inc | Algonquin Power vs. Enbridge | Algonquin Power vs. Telus Corp | Algonquin Power vs. Brookfield Renewable 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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