Correlation Between Huaneng Power and AGL Energy
Can any of the company-specific risk be diversified away by investing in both Huaneng Power and AGL Energy 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 Huaneng Power and AGL Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Huaneng Power International and AGL Energy, you can compare the effects of market volatilities on Huaneng Power and AGL Energy 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 Huaneng Power with a short position of AGL Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaneng Power and AGL Energy.
Diversification Opportunities for Huaneng Power and AGL Energy
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Huaneng and AGL is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Huaneng Power International and AGL Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGL Energy and Huaneng Power 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 Huaneng Power International are associated (or correlated) with AGL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGL Energy has no effect on the direction of Huaneng Power i.e., Huaneng Power and AGL Energy go up and down completely randomly.
Pair Corralation between Huaneng Power and AGL Energy
Assuming the 90 days horizon Huaneng Power International is expected to generate 8.68 times more return on investment than AGL Energy. However, Huaneng Power is 8.68 times more volatile than AGL Energy. It trades about 0.1 of its potential returns per unit of risk. AGL Energy is currently generating about 0.04 per unit of risk. If you would invest 29.00 in Huaneng Power International on August 24, 2024 and sell it today you would earn a total of 21.00 from holding Huaneng Power International or generate 72.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 82.15% |
| Values | Daily Returns |
Huaneng Power International vs. AGL Energy
Performance |
| Timeline |
| Huaneng Power Intern |
| AGL Energy |
Huaneng Power and AGL Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Huaneng Power and AGL Energy
The main advantage of trading using opposite Huaneng Power and AGL Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huaneng Power position performs unexpectedly, AGL Energy 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 AGL Energy will offset losses from the drop in AGL Energy's long position.| Huaneng Power vs. Powertap Hydrogen Capital | Huaneng Power vs. Clearway Energy | Huaneng Power vs. Fusion Fuel Green | Huaneng Power vs. Orsted AS ADR |
| AGL Energy vs. Powertap Hydrogen Capital | AGL Energy vs. Clearway Energy | AGL Energy vs. Fusion Fuel Green | AGL Energy vs. Orsted AS ADR |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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