Correlation Between Maple Leaf and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both Maple Leaf 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 Maple Leaf and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Maple Leaf Foods and Algonquin Power Utilities, you can compare the effects of market volatilities on Maple Leaf 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 Maple Leaf with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maple Leaf and Algonquin Power.
Diversification Opportunities for Maple Leaf and Algonquin Power
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Maple and Algonquin is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods 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 Maple Leaf 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 Maple Leaf Foods 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 Maple Leaf i.e., Maple Leaf and Algonquin Power go up and down completely randomly.
Pair Corralation between Maple Leaf and Algonquin Power
Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 3.32 times more return on investment than Algonquin Power. However, Maple Leaf is 3.32 times more volatile than Algonquin Power Utilities. It trades about 0.18 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about 0.05 per unit of risk. If you would invest 2,125 in Maple Leaf Foods on August 30, 2024 and sell it today you would earn a total of 165.00 from holding Maple Leaf Foods or generate 7.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Maple Leaf Foods vs. Algonquin Power Utilities
Performance |
| Timeline |
| Maple Leaf Foods |
| Algonquin Power Utilities |
Maple Leaf and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maple Leaf and Algonquin Power
The main advantage of trading using opposite Maple Leaf and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maple Leaf 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.| Maple Leaf vs. Amazon CDR | Maple Leaf vs. Apple Inc CDR | Maple Leaf vs. Alphabet Inc CDR | Maple Leaf vs. Walmart Inc CDR |
| Algonquin Power vs. Forstrong Global Income | Algonquin Power vs. Terreno Resources Corp | Algonquin Power vs. iShares Canadian HYBrid | Algonquin Power vs. Brompton European Dividend |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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