Correlation Between United Natural and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both United Natural 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 United Natural and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Natural Foods and Algonquin Power Utilities, you can compare the effects of market volatilities on United Natural 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 United Natural with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Natural and Algonquin Power.
Diversification Opportunities for United Natural and Algonquin Power
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between United and Algonquin is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding United Natural 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 United Natural 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 United Natural 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 United Natural i.e., United Natural and Algonquin Power go up and down completely randomly.
Pair Corralation between United Natural and Algonquin Power
Assuming the 90 days horizon United Natural Foods is expected to generate 2.01 times more return on investment than Algonquin Power. However, United Natural is 2.01 times more volatile than Algonquin Power Utilities. It trades about 0.03 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 1,819 in United Natural Foods on August 28, 2024 and sell it today you would earn a total of 391.00 from holding United Natural Foods or generate 21.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Natural Foods vs. Algonquin Power Utilities
Performance |
| Timeline |
| United Natural Foods |
| Algonquin Power Utilities |
United Natural and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Natural and Algonquin Power
The main advantage of trading using opposite United Natural and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Natural 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 United Natural Foods 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. NMI Holdings | Algonquin Power vs. Origin Agritech | Algonquin Power vs. SIVERS SEMICONDUCTORS AB |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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