Correlation Between Canadian Utilities and Emera
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities and Emera 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 Emera 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 Emera Inc, you can compare the effects of market volatilities on Canadian Utilities and Emera 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 Emera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and Emera.
Diversification Opportunities for Canadian Utilities and Emera
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canadian and Emera is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and Emera Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Inc 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 Emera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Inc has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and Emera go up and down completely randomly.
Pair Corralation between Canadian Utilities and Emera
Assuming the 90 days horizon Canadian Utilities Limited is expected to generate 0.87 times more return on investment than Emera. However, Canadian Utilities Limited is 1.15 times less risky than Emera. It trades about 0.06 of its potential returns per unit of risk. Emera Inc is currently generating about -0.07 per unit of risk. If you would invest 3,566 in Canadian Utilities Limited on August 25, 2024 and sell it today you would earn a total of 44.00 from holding Canadian Utilities Limited or generate 1.23% 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. Emera Inc
Performance |
| Timeline |
| Canadian Utilities |
| Emera Inc |
Canadian Utilities and Emera Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and Emera
The main advantage of trading using opposite Canadian Utilities and Emera positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities position performs unexpectedly, Emera 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 Emera will offset losses from the drop in Emera's long position.| Canadian Utilities vs. Fortis Inc | Canadian Utilities vs. Algonquin Power Utilities | Canadian Utilities vs. Capital Power | Canadian Utilities vs. Forstrong Global Income |
| Emera vs. Fortis Inc | Emera vs. Canadian Utilities Limited | Emera vs. TC Energy Corp | Emera vs. Capital Power |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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