Correlation Between Financial and Altagas
Can any of the company-specific risk be diversified away by investing in both Financial and Altagas 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 Financial and Altagas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial 15 Split and Altagas Ltd Pref, you can compare the effects of market volatilities on Financial and Altagas 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 Financial with a short position of Altagas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Altagas.
Diversification Opportunities for Financial and Altagas
Very poor diversification
The 3 months correlation between Financial and Altagas is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Altagas Ltd Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altagas Pref and 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 Financial 15 Split are associated (or correlated) with Altagas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altagas Pref has no effect on the direction of Financial i.e., Financial and Altagas go up and down completely randomly.
Pair Corralation between Financial and Altagas
Assuming the 90 days trading horizon Financial is expected to generate 1.43 times less return on investment than Altagas. But when comparing it to its historical volatility, Financial 15 Split is 3.59 times less risky than Altagas. It trades about 0.23 of its potential returns per unit of risk. Altagas Ltd Pref is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,620 in Altagas Ltd Pref on December 1, 2024 and sell it today you would earn a total of 810.00 from holding Altagas Ltd Pref or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial 15 Split vs. Altagas Ltd Pref
Performance |
| Timeline |
| Financial 15 Split |
| Altagas Pref |
Financial and Altagas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and Altagas
The main advantage of trading using opposite Financial and Altagas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial position performs unexpectedly, Altagas 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 Altagas will offset losses from the drop in Altagas' long position.| Financial vs. North American Financial | Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. Dividend 15 Split |
| Altagas vs. Financial 15 Split | Altagas vs. Thunderbird Entertainment Group | Altagas vs. E L Financial 3 | Altagas vs. Rogers Communications |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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