Correlation Between Orsted A/S and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both Orsted A/S 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 Orsted A/S and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orsted AS ADR and Algonquin Power Utilities, you can compare the effects of market volatilities on Orsted A/S 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 Orsted A/S with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orsted A/S and Algonquin Power.
Diversification Opportunities for Orsted A/S and Algonquin Power
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Orsted and Algonquin is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Orsted AS ADR 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 Orsted A/S 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 Orsted AS ADR 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 Orsted A/S i.e., Orsted A/S and Algonquin Power go up and down completely randomly.
Pair Corralation between Orsted A/S and Algonquin Power
Assuming the 90 days horizon Orsted AS ADR is expected to generate 1.35 times more return on investment than Algonquin Power. However, Orsted A/S is 1.35 times more volatile than Algonquin Power Utilities. It trades about -0.03 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about -0.04 per unit of risk. If you would invest 1,855 in Orsted AS ADR on November 9, 2024 and sell it today you would lose (473.00) from holding Orsted AS ADR or give up 25.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orsted AS ADR vs. Algonquin Power Utilities
Performance |
| Timeline |
| Orsted AS ADR |
| Algonquin Power Utilities |
Orsted A/S and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orsted A/S and Algonquin Power
The main advantage of trading using opposite Orsted A/S and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orsted A/S 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.| Orsted A/S vs. Brookfield Renewable Partners | Orsted A/S vs. Brookfield Renewable Corp | Orsted A/S vs. Clearway Energy Class | Orsted A/S vs. Nextera Energy Partners |
| Algonquin Power vs. Brookfield Renewable Corp | Algonquin Power vs. Nextera Energy Partners | Algonquin Power vs. Clearway Energy Class | Algonquin Power vs. Clearway Energy |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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