Correlation Between Algonquin Power and ASM International

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

Diversification Opportunities for Algonquin Power and ASM International

0.34

Correlation Coefficient

Algonquin Power  ASM International

Weak diversification

The 3 months correlation between Algonquin and ASM is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and ASM International NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASM International 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 ASM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASM International has no effect on the direction of Algonquin Power i.e., Algonquin Power and ASM International go up and down completely randomly.

Pair Corralation between Algonquin Power and ASM International

Assuming the 90 days trading horizon Algonquin Power Utilities is expected to generate 1.28 times more return on investment than ASM International. However, Algonquin Power is 1.28 times more volatile than ASM International NV. It trades about 0.04 of its potential returns per unit of risk. ASM International NV is currently generating about -0.12 per unit of risk. If you would invest  794.00  in Algonquin Power Utilities on January 20, 2024 and sell it today you would earn a total of  11.00  from holding Algonquin Power Utilities or generate 1.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Algonquin Power Utilities  vs.  ASM International NV

Algonquin Power Utilities

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Algonquin Power is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

ASM International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASM International NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ASM International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algonquin Power and ASM International

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

The idea behind Algonquin Power Utilities and ASM International NV 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.