Correlation Between Royal Bank and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both Royal Bank 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 Royal Bank and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Bank of and Algonquin Power Utilities, you can compare the effects of market volatilities on Royal Bank 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 Royal Bank with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Algonquin Power.
Diversification Opportunities for Royal Bank and Algonquin Power
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Royal and Algonquin is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of 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 Royal Bank 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 Royal Bank of 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 Royal Bank i.e., Royal Bank and Algonquin Power go up and down completely randomly.
Pair Corralation between Royal Bank and Algonquin Power
Assuming the 90 days trading horizon Royal Bank of is expected to generate 0.19 times more return on investment than Algonquin Power. However, Royal Bank of is 5.26 times less risky than Algonquin Power. It trades about 0.23 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 2,435 in Royal Bank of on August 28, 2024 and sell it today you would earn a total of 31.00 from holding Royal Bank of or generate 1.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Bank of vs. Algonquin Power Utilities
Performance |
| Timeline |
| Royal Bank |
| Algonquin Power Utilities |
Royal Bank and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Algonquin Power
The main advantage of trading using opposite Royal Bank and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank 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.| Royal Bank vs. Forstrong Global Income | Royal Bank vs. BMO Aggregate Bond | Royal Bank vs. Terreno Resources Corp | Royal Bank vs. iShares Canadian HYBrid |
| Algonquin Power vs. Fortis Inc | Algonquin Power vs. Enbridge | Algonquin Power vs. Telus Corp | Algonquin Power vs. Brookfield Renewable Partners |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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