Correlation Between Fortescue Metals and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both Fortescue Metals 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 Fortescue Metals and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortescue Metals Group and Algonquin Power Utilities, you can compare the effects of market volatilities on Fortescue Metals 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 Fortescue Metals with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortescue Metals and Algonquin Power.
Diversification Opportunities for Fortescue Metals and Algonquin Power
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fortescue and Algonquin is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group 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 Fortescue Metals 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 Fortescue Metals Group 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 Fortescue Metals i.e., Fortescue Metals and Algonquin Power go up and down completely randomly.
Pair Corralation between Fortescue Metals and Algonquin Power
Assuming the 90 days horizon Fortescue Metals Group is expected to generate 0.95 times more return on investment than Algonquin Power. However, Fortescue Metals Group is 1.06 times less risky than Algonquin Power. It trades about 0.15 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about -0.08 per unit of risk. If you would invest 1,103 in Fortescue Metals Group on November 7, 2024 and sell it today you would earn a total of 57.00 from holding Fortescue Metals Group or generate 5.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Fortescue Metals Group vs. Algonquin Power Utilities
Performance |
| Timeline |
| Fortescue Metals |
| Algonquin Power Utilities |
Fortescue Metals and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortescue Metals and Algonquin Power
The main advantage of trading using opposite Fortescue Metals and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortescue Metals 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.| Fortescue Metals vs. Transport International Holdings | Fortescue Metals vs. Broadcom | Fortescue Metals vs. NAGOYA RAILROAD | Fortescue Metals vs. VARIOUS EATERIES LS |
| Algonquin Power vs. PLAYTECH | Algonquin Power vs. SALESFORCE INC CDR | Algonquin Power vs. Salesforce | Algonquin Power vs. The Trade Desk |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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