Correlation Between EDP Renováveis and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both EDP Renováveis 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 EDP Renováveis and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EDP Renovveis SA and Algonquin Power Utilities, you can compare the effects of market volatilities on EDP Renováveis 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 EDP Renováveis with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDP Renováveis and Algonquin Power.
Diversification Opportunities for EDP Renováveis and Algonquin Power
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EDP and Algonquin is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding EDP Renovveis SA 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 EDP Renováveis 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 EDP Renovveis SA 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 EDP Renováveis i.e., EDP Renováveis and Algonquin Power go up and down completely randomly.
Pair Corralation between EDP Renováveis and Algonquin Power
Assuming the 90 days horizon EDP Renovveis SA is expected to under-perform the Algonquin Power. In addition to that, EDP Renováveis is 1.15 times more volatile than Algonquin Power Utilities. It trades about -0.05 of its total potential returns per unit of risk. Algonquin Power Utilities is currently generating about -0.05 per unit of volatility. If you would invest 698.00 in Algonquin Power Utilities on August 28, 2024 and sell it today you would lose (246.00) from holding Algonquin Power Utilities or give up 35.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EDP Renovveis SA vs. Algonquin Power Utilities
Performance |
| Timeline |
| EDP Renovveis SA |
| Algonquin Power Utilities |
EDP Renováveis and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EDP Renováveis and Algonquin Power
The main advantage of trading using opposite EDP Renováveis and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDP Renováveis 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.| EDP Renováveis vs. Superior Plus Corp | EDP Renováveis vs. NMI Holdings | EDP Renováveis vs. Origin Agritech | EDP Renováveis vs. SIVERS SEMICONDUCTORS AB |
| Algonquin Power vs. Superior Plus Corp | Algonquin Power vs. NMI Holdings | Algonquin Power vs. Origin Agritech | Algonquin Power vs. SIVERS SEMICONDUCTORS AB |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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