Correlation Between Algonquin Power and Deutsche Post

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

Diversification Opportunities for Algonquin Power and Deutsche Post

0.56

Correlation Coefficient

Algonquin Power  Deutsche Post

Very weak diversification

The 3 months correlation between Algonquin and Deutsche is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Deutsche Post AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Post AG 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 Deutsche Post. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Post AG has no effect on the direction of Algonquin Power i.e., Algonquin Power and Deutsche Post go up and down completely randomly.

Pair Corralation between Algonquin Power and Deutsche Post

Assuming the 90 days horizon Algonquin Power is expected to generate 1.73 times less return on investment than Deutsche Post. But when comparing it to its historical volatility, Algonquin Power Utilities is 1.42 times less risky than Deutsche Post. It trades about 0.11 of its potential returns per unit of risk. Deutsche Post AG is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,420  in Deutsche Post AG on December 24, 2024 and sell it today you would earn a total of  680.00  from holding Deutsche Post AG or generate 19.88% return on investment over 90 days.

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

Algonquin Power Utilities  vs.  Deutsche Post AG

Algonquin Power Utilities

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Algonquin Power may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Deutsche Post AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Post AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Deutsche Post reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algonquin Power and Deutsche Post

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

The idea behind Algonquin Power Utilities and Deutsche Post AG 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.