Correlation Between Canadian Utilities and Atco
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities and Atco 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 Canadian Utilities and Atco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Limited and Atco, you can compare the effects of market volatilities on Canadian Utilities and Atco 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 Canadian Utilities with a short position of Atco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and Atco.
Diversification Opportunities for Canadian Utilities and Atco
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canadian and Atco is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and Atco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atco and Canadian Utilities 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 Canadian Utilities Limited are associated (or correlated) with Atco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atco has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and Atco go up and down completely randomly.
Pair Corralation between Canadian Utilities and Atco
Assuming the 90 days horizon Canadian Utilities Limited is expected to generate 1.09 times more return on investment than Atco. However, Canadian Utilities is 1.09 times more volatile than Atco. It trades about 0.03 of its potential returns per unit of risk. Atco is currently generating about -0.01 per unit of risk. If you would invest 2,562 in Canadian Utilities Limited on August 28, 2024 and sell it today you would earn a total of 13.00 from holding Canadian Utilities Limited or generate 0.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Limited vs. Atco
Performance |
| Timeline |
| Canadian Utilities |
| Atco |
Canadian Utilities and Atco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and Atco
The main advantage of trading using opposite Canadian Utilities and Atco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities position performs unexpectedly, Atco 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 Atco will offset losses from the drop in Atco's long position.| Canadian Utilities vs. TransAlta Corp | Canadian Utilities vs. Pampa Energia SA | Canadian Utilities vs. Vistra Energy Corp | Canadian Utilities vs. NRG 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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