Correlation Between Algonquin Power and Airbus Group

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

Diversification Opportunities for Algonquin Power and Airbus Group

-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between Algonquin and Airbus is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Airbus Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group SE 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 Airbus Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus Group SE has no effect on the direction of Algonquin Power i.e., Algonquin Power and Airbus Group go up and down completely randomly.

Pair Corralation between Algonquin Power and Airbus Group

Assuming the 90 days trading horizon Algonquin Power is expected to generate 1.94 times less return on investment than Airbus Group. In addition to that, Algonquin Power is 1.65 times more volatile than Airbus Group SE. It trades about 0.18 of its total potential returns per unit of risk. Airbus Group SE is currently generating about 0.58 per unit of volatility. If you would invest  16,054  in Airbus Group SE on December 29, 2023 and sell it today you would earn a total of  2,620  from holding Airbus Group SE or generate 16.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Algonquin Power Utilities  vs.  Airbus Group SE

 Performance 
       Timeline  
Algonquin Power Utilities 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
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.
Airbus Group SE 

Risk-Adjusted Performance

19 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Airbus Group SE are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Airbus Group reported solid returns over the last few months and may actually be approaching a breakup point.

Algonquin Power and Airbus Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Algonquin Power and Airbus Group

The main advantage of trading using opposite Algonquin Power and Airbus Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Airbus Group 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 Airbus Group will offset losses from the drop in Airbus Group's long position.
The idea behind Algonquin Power Utilities and Airbus Group SE 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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