Correlation Between Algonquin Power and Caribbean Utilities
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Caribbean Utilities 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 Caribbean Utilities 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 Caribbean Utilities, you can compare the effects of market volatilities on Algonquin Power and Caribbean Utilities 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 Caribbean Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Caribbean Utilities.
Diversification Opportunities for Algonquin Power and Caribbean Utilities
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Algonquin and Caribbean is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Caribbean Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caribbean Utilities 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 Caribbean Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caribbean Utilities has no effect on the direction of Algonquin Power i.e., Algonquin Power and Caribbean Utilities go up and down completely randomly.
Pair Corralation between Algonquin Power and Caribbean Utilities
Assuming the 90 days trading horizon Algonquin Power Utilities is expected to under-perform the Caribbean Utilities. In addition to that, Algonquin Power is 1.09 times more volatile than Caribbean Utilities. It trades about -0.05 of its total potential returns per unit of risk. Caribbean Utilities is currently generating about 0.0 per unit of volatility. If you would invest 1,400 in Caribbean Utilities on March 28, 2024 and sell it today you would lose (9.00) from holding Caribbean Utilities or give up 0.64% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.24% |
Values | Daily Returns |
Algonquin Power Utilities vs. Caribbean Utilities
Performance |
Timeline |
Algonquin Power Utilities |
Caribbean Utilities |
Algonquin Power and Caribbean Utilities Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Algonquin Power and Caribbean Utilities
The main advantage of trading using opposite Algonquin Power and Caribbean Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Caribbean Utilities 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 Caribbean Utilities will offset losses from the drop in Caribbean Utilities' long position.Algonquin Power vs. Fortis Inc | Algonquin Power vs. Enbridge | Algonquin Power vs. Telus Corp | Algonquin Power vs. Brookfield Renewable Partners |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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