Correlation Between Algonquin Power and Atlantic Power

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Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Atlantic 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 Algonquin Power and Atlantic Power 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 Atlantic Power, you can compare the effects of market volatilities on Algonquin Power and Atlantic 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 Algonquin Power with a short position of Atlantic Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Atlantic Power.

Diversification Opportunities for Algonquin Power and Atlantic Power

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Algonquin and Atlantic is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Atlantic Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlantic Power 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 Atlantic Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlantic Power has no effect on the direction of Algonquin Power i.e., Algonquin Power and Atlantic Power go up and down completely randomly.

Pair Corralation between Algonquin Power and Atlantic Power

If you would invest  581.00  in Algonquin Power Utilities on December 29, 2023 and sell it today you would earn a total of  51.00  from holding Algonquin Power Utilities or generate 8.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Algonquin Power Utilities  vs.  Atlantic Power

 Performance 
       Timeline  
Algonquin Power Utilities 

Risk-Adjusted Performance

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Over the last 90 days Algonquin Power Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Algonquin Power is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
Atlantic Power 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Atlantic Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Atlantic Power is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Algonquin Power and Atlantic Power Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Algonquin Power and Atlantic Power

The main advantage of trading using opposite Algonquin Power and Atlantic Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Atlantic 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 Atlantic Power will offset losses from the drop in Atlantic Power's long position.
The idea behind Algonquin Power Utilities and Atlantic Power 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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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