Correlation Between Definity Financial and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both Definity Financial 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 Definity Financial and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Definity Financial Corp and Algonquin Power Utilities, you can compare the effects of market volatilities on Definity Financial 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 Definity Financial with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Definity Financial and Algonquin Power.
Diversification Opportunities for Definity Financial and Algonquin Power
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Definity and Algonquin is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Definity Financial Corp 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 Definity Financial 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 Definity Financial Corp 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 Definity Financial i.e., Definity Financial and Algonquin Power go up and down completely randomly.
Pair Corralation between Definity Financial and Algonquin Power
Assuming the 90 days trading horizon Definity Financial Corp is expected to generate 1.87 times more return on investment than Algonquin Power. However, Definity Financial is 1.87 times more volatile than Algonquin Power Utilities. It trades about 0.34 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about 0.18 per unit of risk. If you would invest 5,373 in Definity Financial Corp on September 1, 2024 and sell it today you would earn a total of 480.00 from holding Definity Financial Corp or generate 8.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Definity Financial Corp vs. Algonquin Power Utilities
Performance |
| Timeline |
| Definity Financial Corp |
| Algonquin Power Utilities |
Definity Financial and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Definity Financial and Algonquin Power
The main advantage of trading using opposite Definity Financial and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Definity Financial 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.| Definity Financial vs. Trisura Group | Definity Financial vs. Pet Valu Holdings | Definity Financial vs. Intact Financial | Definity Financial vs. Topaz Energy Corp |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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