Correlation Between Capital Power and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both Capital 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 Capital 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 Capital Power and Algonquin Power Utilities, you can compare the effects of market volatilities on Capital 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 Capital Power with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Power and Algonquin Power.
Diversification Opportunities for Capital Power and Algonquin Power
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Capital and Algonquin is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Capital Power 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 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 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 Capital Power i.e., Capital Power and Algonquin Power go up and down completely randomly.
Pair Corralation between Capital Power and Algonquin Power
Assuming the 90 days trading horizon Capital Power is expected to generate 1.76 times more return on investment than Algonquin Power. However, Capital Power is 1.76 times more volatile than Algonquin Power Utilities. It trades about 0.33 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about -0.13 per unit of risk. If you would invest 5,099 in Capital Power on August 24, 2024 and sell it today you would earn a total of 960.00 from holding Capital Power or generate 18.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Power vs. Algonquin Power Utilities
Performance |
| Timeline |
| Capital Power |
| Algonquin Power Utilities |
Capital Power and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Power and Algonquin Power
The main advantage of trading using opposite Capital Power and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital 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.| Capital Power vs. Canadian Utilities Limited | Capital Power vs. Emera Inc | Capital Power vs. Keyera Corp | Capital Power vs. Northland Power |
| Algonquin Power vs. Maxim Power Corp | Algonquin Power vs. Forstrong Global Income | Algonquin Power vs. BMO Aggregate Bond | Algonquin Power vs. iShares Canadian HYBrid |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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