Correlation Between Algonquin Power and Apple

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

Diversification Opportunities for Algonquin Power and Apple

-0.63

Correlation Coefficient

Algonquin Power  Apple

Excellent diversification

The 3 months correlation between Algonquin and Apple is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Algonquin Power i.e., Algonquin Power and Apple go up and down completely randomly.

Pair Corralation between Algonquin Power and Apple

Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the Apple. In addition to that, Algonquin Power is 1.72 times more volatile than Apple Inc. It trades about -0.28 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.48 per unit of volatility. If you would invest  22,135  in Apple Inc on September 24, 2024 and sell it today you would earn a total of  2,015  from holding Apple Inc or generate 9.1% return on investment over 90 days.

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

Algonquin Power Utilities  vs.  Apple Inc

Algonquin Power Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Algonquin Power Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Apple Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Apple sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algonquin Power and Apple

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

The idea behind Algonquin Power Utilities and Apple Inc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.