Correlation Between Excelerate Energy and Algonquin Power

Can any of the company-specific risk be diversified away by investing in both Excelerate Energy and Algonquin 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 Excelerate Energy and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Excelerate Energy and Algonquin Power Utilities, you can compare the effects of market volatilities on Excelerate Energy and Algonquin 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 Excelerate Energy with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Excelerate Energy and Algonquin Power.

Diversification Opportunities for Excelerate Energy and Algonquin Power

0.69

Correlation Coefficient

Excelerate Energy  Algonquin Power

Poor diversification

The 3 months correlation between Excelerate and Algonquin is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Excelerate Energy and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities and Excelerate Energy 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 Excelerate Energy are associated (or correlated) with Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of Excelerate Energy i.e., Excelerate Energy and Algonquin Power go up and down completely randomly.

Pair Corralation between Excelerate Energy and Algonquin Power

Allowing for the 90-day total investment horizon Excelerate Energy is expected to generate 1.33 times more return on investment than Algonquin Power. However, Excelerate Energy is 1.33 times more volatile than Algonquin Power Utilities. It trades about -0.02 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about -0.04 per unit of risk. If you would invest  2,185  in Excelerate Energy on February 3, 2024 and sell it today you would lose (444.00) from holding Excelerate Energy or give up 20.32% of portfolio value over 90 days.

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

Excelerate Energy  vs.  Algonquin Power Utilities

Excelerate Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Excelerate Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Excelerate Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Algonquin Power Utilities

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Algonquin Power displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Excelerate Energy and Algonquin Power

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

The idea behind Excelerate Energy and Algonquin Power Utilities 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.