Correlation Between Western Copper and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both Western Copper 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 Western Copper and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Copper and and Algonquin Power Utilities, you can compare the effects of market volatilities on Western Copper 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 Western Copper with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Copper and Algonquin Power.
Diversification Opportunities for Western Copper and Algonquin Power
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Western and Algonquin is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and 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 Western Copper 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 Western Copper and 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 Western Copper i.e., Western Copper and Algonquin Power go up and down completely randomly.
Pair Corralation between Western Copper and Algonquin Power
Assuming the 90 days trading horizon Western Copper is expected to generate 1.03 times less return on investment than Algonquin Power. In addition to that, Western Copper is 5.89 times more volatile than Algonquin Power Utilities. It trades about 0.01 of its total potential returns per unit of risk. Algonquin Power Utilities is currently generating about 0.05 per unit of volatility. If you would invest 2,321 in Algonquin Power Utilities on August 30, 2024 and sell it today you would earn a total of 16.00 from holding Algonquin Power Utilities or generate 0.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Copper and vs. Algonquin Power Utilities
Performance |
| Timeline |
| Western Copper |
| Algonquin Power Utilities |
Western Copper and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Copper and Algonquin Power
The main advantage of trading using opposite Western Copper and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Copper 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.| Western Copper vs. First Majestic Silver | Western Copper vs. Ivanhoe Energy | Western Copper vs. Orezone Gold Corp | Western Copper vs. Faraday Copper Corp |
| 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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