Correlation Between Canadian Utilities and Atlantica Sustainable

Can any of the company-specific risk be diversified away by investing in both Canadian Utilities and Atlantica Sustainable 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 Canadian Utilities and Atlantica Sustainable into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canadian Utilities Limited and Atlantica Sustainable Infrastructure, you can compare the effects of market volatilities on Canadian Utilities and Atlantica Sustainable 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 Canadian Utilities with a short position of Atlantica Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and Atlantica Sustainable.

Diversification Opportunities for Canadian Utilities and Atlantica Sustainable

0.65

Correlation Coefficient

Canadian Utilities  Atlantica Sustainable

Poor diversification

The 3 months correlation between Canadian and Atlantica is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and Atlantica Sustainable Infrastr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlantica Sustainable and Canadian Utilities 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 Canadian Utilities Limited are associated (or correlated) with Atlantica Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlantica Sustainable has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and Atlantica Sustainable go up and down completely randomly.

Pair Corralation between Canadian Utilities and Atlantica Sustainable

Assuming the 90 days horizon Canadian Utilities is expected to generate 13.91 times less return on investment than Atlantica Sustainable. But when comparing it to its historical volatility, Canadian Utilities Limited is 2.43 times less risky than Atlantica Sustainable. It trades about 0.03 of its potential returns per unit of risk. Atlantica Sustainable Infrastructure is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,736  in Atlantica Sustainable Infrastructure on March 7, 2024 and sell it today you would earn a total of  464.00  from holding Atlantica Sustainable Infrastructure or generate 26.73% return on investment over 90 days.

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

Canadian Utilities Limited  vs.  Atlantica Sustainable Infrastr

Canadian Utilities

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Utilities Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Atlantica Sustainable

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atlantica Sustainable Infrastructure are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Atlantica Sustainable showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Utilities and Atlantica Sustainable

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

The idea behind Canadian Utilities Limited and Atlantica Sustainable Infrastructure 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.