Correlation Between Capital Power and ATCO
Can any of the company-specific risk be diversified away by investing in both Capital Power 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 Capital Power and ATCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Power and ATCO, you can compare the effects of market volatilities on Capital Power 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 Capital Power with a short position of ATCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Power and ATCO.
Diversification Opportunities for Capital Power and ATCO
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and ATCO is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Capital Power and ATCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATCO and Capital 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 Capital Power 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 Capital Power i.e., Capital Power and ATCO go up and down completely randomly.
Pair Corralation between Capital Power and ATCO
Assuming the 90 days trading horizon Capital Power is expected to generate 2.67 times more return on investment than ATCO. However, Capital Power is 2.67 times more volatile than ATCO. It trades about 0.15 of its potential returns per unit of risk. ATCO is currently generating about 0.15 per unit of risk. If you would invest 5,697 in Capital Power on September 12, 2024 and sell it today you would earn a total of 460.00 from holding Capital Power or generate 8.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Power vs. ATCO
Performance |
| Timeline |
| Capital Power |
| ATCO |
Capital Power and ATCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Power and ATCO
The main advantage of trading using opposite Capital Power and ATCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Power 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.| Capital Power vs. Canadian Utilities Limited | Capital Power vs. Emera Inc | Capital Power vs. Keyera Corp | Capital Power vs. Northland Power |
| ATCO vs. Canadian Utilities Limited | ATCO vs. Emera Inc | ATCO vs. Capital Power | ATCO vs. Transcontinental |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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