Correlation Between Algonquin Power and Advent Technologies

Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Advent Technologies 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 Algonquin Power and Advent Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Algonquin Power Utilities and Advent Technologies Holdings, you can compare the effects of market volatilities on Algonquin Power and Advent Technologies 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 Algonquin Power with a short position of Advent Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Advent Technologies.

Diversification Opportunities for Algonquin Power and Advent Technologies

-0.73

Correlation Coefficient

Algonquin Power  Advent Technologies

Pay attention - limited upside

The 3 months correlation between Algonquin and Advent is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Advent Technologies Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advent Technologies and Algonquin Power 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 Algonquin Power Utilities are associated (or correlated) with Advent Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advent Technologies has no effect on the direction of Algonquin Power i.e., Algonquin Power and Advent Technologies go up and down completely randomly.

Pair Corralation between Algonquin Power and Advent Technologies

Considering the 90-day investment horizon Algonquin Power Utilities is expected to generate 0.26 times more return on investment than Advent Technologies. However, Algonquin Power Utilities is 3.8 times less risky than Advent Technologies. It trades about 0.27 of its potential returns per unit of risk. Advent Technologies Holdings is currently generating about -0.31 per unit of risk. If you would invest  607.00  in Algonquin Power Utilities on February 22, 2024 and sell it today you would earn a total of  60.00  from holding Algonquin Power Utilities or generate 9.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Algonquin Power Utilities  vs.  Advent Technologies Holdings

Algonquin Power Utilities

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Algonquin Power displayed solid returns over the last few months and may actually be approaching a breakup point.

Advent Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advent Technologies Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Algonquin Power and Advent Technologies

The main advantage of trading using opposite Algonquin Power and Advent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Advent Technologies 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 Advent Technologies will offset losses from the drop in Advent Technologies' long position.

The idea behind Algonquin Power Utilities and Advent Technologies Holdings 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.

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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.