Correlation Between Algonquin Power and TT Electronics
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and TT Electronics 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 TT Electronics 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 TT Electronics PLC, you can compare the effects of market volatilities on Algonquin Power and TT Electronics 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 TT Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and TT Electronics.
Diversification Opportunities for Algonquin Power and TT Electronics
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Algonquin and 7TT is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and TT Electronics PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TT Electronics PLC 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 TT Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TT Electronics PLC has no effect on the direction of Algonquin Power i.e., Algonquin Power and TT Electronics go up and down completely randomly.
Pair Corralation between Algonquin Power and TT Electronics
Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the TT Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 1.48 times less risky than TT Electronics. The stock trades about -0.2 of its potential returns per unit of risk. The TT Electronics PLC is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 133.00 in TT Electronics PLC on September 24, 2024 and sell it today you would lose (8.00) from holding TT Electronics PLC or give up 6.02% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 95.45% |
Values | Daily Returns |
Algonquin Power Utilities vs. TT Electronics PLC
Performance |
Timeline |
Algonquin Power Utilities |
TT Electronics PLC |
Algonquin Power and TT Electronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Algonquin Power and TT Electronics
The main advantage of trading using opposite Algonquin Power and TT Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, TT Electronics 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 TT Electronics will offset losses from the drop in TT Electronics' long position.Algonquin Power vs. Orsted AS | Algonquin Power vs. EDP Renovveis SA | Algonquin Power vs. CGN Power Co | Algonquin Power vs. Huaneng Power International |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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