Correlation Between Canadian Utilities and EuroSite Power
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities and EuroSite 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 Canadian Utilities and EuroSite Power 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 EuroSite Power, you can compare the effects of market volatilities on Canadian Utilities and EuroSite 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 Canadian Utilities with a short position of EuroSite Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and EuroSite Power.
Diversification Opportunities for Canadian Utilities and EuroSite Power
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Canadian and EuroSite is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and EuroSite Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuroSite Power 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 EuroSite Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EuroSite Power has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and EuroSite Power go up and down completely randomly.
Pair Corralation between Canadian Utilities and EuroSite Power
Assuming the 90 days horizon Canadian Utilities is expected to generate 10.72 times less return on investment than EuroSite Power. But when comparing it to its historical volatility, Canadian Utilities Limited is 8.43 times less risky than EuroSite Power. It trades about 0.04 of its potential returns per unit of risk. EuroSite Power is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4.00 in EuroSite Power on September 12, 2024 and sell it today you would earn a total of 1.00 from holding EuroSite Power or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.09% |
| Values | Daily Returns |
Canadian Utilities Limited vs. EuroSite Power
Performance |
| Timeline |
| Canadian Utilities |
| EuroSite Power |
Canadian Utilities and EuroSite Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and EuroSite Power
The main advantage of trading using opposite Canadian Utilities and EuroSite Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities position performs unexpectedly, EuroSite 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 EuroSite Power will offset losses from the drop in EuroSite Power's long position.| Canadian Utilities vs. AuraSource | Canadian Utilities vs. Energy of Minas | Canadian Utilities vs. Allete Inc | Canadian Utilities vs. Avista |
| EuroSite Power vs. Atco | EuroSite Power vs. Canadian Utilities Limited | EuroSite Power vs. Engie SA ADR | EuroSite Power vs. The AES |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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