Correlation Between PENN NATL and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both PENN NATL 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 PENN NATL and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PENN NATL GAMING and Algonquin Power Utilities, you can compare the effects of market volatilities on PENN NATL 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 PENN NATL with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and Algonquin Power.
Diversification Opportunities for PENN NATL and Algonquin Power
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PENN and Algonquin is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING 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 PENN NATL 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 PENN NATL GAMING 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 PENN NATL i.e., PENN NATL and Algonquin Power go up and down completely randomly.
Pair Corralation between PENN NATL and Algonquin Power
Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the Algonquin Power. In addition to that, PENN NATL is 1.68 times more volatile than Algonquin Power Utilities. It trades about -0.16 of its total potential returns per unit of risk. Algonquin Power Utilities is currently generating about -0.08 per unit of volatility. If you would invest 443.00 in Algonquin Power Utilities on September 14, 2024 and sell it today you would lose (13.00) from holding Algonquin Power Utilities or give up 2.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PENN NATL GAMING vs. Algonquin Power Utilities
Performance |
| Timeline |
| PENN NATL GAMING |
| Algonquin Power Utilities |
PENN NATL and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PENN NATL and Algonquin Power
The main advantage of trading using opposite PENN NATL and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL 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.The idea behind PENN NATL GAMING and Algonquin Power Utilities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Algonquin Power vs. Superior Plus Corp | Algonquin Power vs. SIVERS SEMICONDUCTORS AB | Algonquin Power vs. Norsk Hydro ASA | Algonquin Power vs. Reliance Steel Aluminum |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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