Correlation Between Algonquin Power and CITIC

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

Diversification Opportunities for Algonquin Power and CITIC

0.09

Correlation Coefficient

Algonquin Power  CITIC

Significant diversification

The 3 months correlation between Algonquin and CITIC is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited 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 CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Limited has no effect on the direction of Algonquin Power i.e., Algonquin Power and CITIC go up and down completely randomly.

Pair Corralation between Algonquin Power and CITIC

Assuming the 90 days horizon Algonquin Power Utilities is expected to generate 0.77 times more return on investment than CITIC. However, Algonquin Power Utilities is 1.29 times less risky than CITIC. It trades about 0.01 of its potential returns per unit of risk. CITIC Limited is currently generating about 0.0 per unit of risk. If you would invest  436.00  in Algonquin Power Utilities on October 7, 2024 and sell it today you would earn a total of  1.00  from holding Algonquin Power Utilities or generate 0.23% return on investment over 90 days.

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

Algonquin Power Utilities  vs.  CITIC Limited

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 nearly stable basic indicators, Algonquin Power is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

CITIC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Algonquin Power and CITIC

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

The idea behind Algonquin Power Utilities and CITIC Limited 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.