Correlation Between Utilities Select and Altus Power
Can any of the company-specific risk be diversified away by investing in both Utilities Select and Altus 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 Utilities Select and Altus Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Utilities Select Sector and Altus Power, you can compare the effects of market volatilities on Utilities Select and Altus 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 Utilities Select with a short position of Altus Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Utilities Select and Altus Power.
Diversification Opportunities for Utilities Select and Altus Power
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Utilities and Altus is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Select Sector and Altus Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altus Power and Utilities Select 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 Utilities Select Sector are associated (or correlated) with Altus Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altus Power has no effect on the direction of Utilities Select i.e., Utilities Select and Altus Power go up and down completely randomly.
Pair Corralation between Utilities Select and Altus Power
Considering the 90-day investment horizon Utilities Select is expected to generate 7.6 times less return on investment than Altus Power. But when comparing it to its historical volatility, Utilities Select Sector is 7.47 times less risky than Altus Power. It trades about 0.17 of its potential returns per unit of risk. Altus Power is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 344.00 in Altus Power on September 1, 2024 and sell it today you would earn a total of 88.00 from holding Altus Power or generate 25.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Utilities Select Sector vs. Altus Power
Performance |
| Timeline |
| Utilities Select Sector |
| Altus Power |
Utilities Select and Altus Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Utilities Select and Altus Power
The main advantage of trading using opposite Utilities Select and Altus Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Utilities Select position performs unexpectedly, Altus 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 Altus Power will offset losses from the drop in Altus Power's long position.| Utilities Select vs. Consumer Staples Select | Utilities Select vs. Industrial Select Sector | Utilities Select vs. Materials Select Sector | Utilities Select vs. Health Care Select |
| Altus Power vs. Ormat Technologies | Altus Power vs. Enlight Renewable Energy | Altus Power vs. Fluence Energy | Altus Power vs. Renew Energy Global |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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