Correlation Between Algonquin Power and Hyundai

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

Diversification Opportunities for Algonquin Power and Hyundai

0.75

Correlation Coefficient

Algonquin Power  Hyundai

Poor diversification

The 3 months correlation between Algonquin and Hyundai is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor 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 Hyundai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Motor has no effect on the direction of Algonquin Power i.e., Algonquin Power and Hyundai go up and down completely randomly.

Pair Corralation between Algonquin Power and Hyundai

Assuming the 90 days horizon Algonquin Power Utilities is expected to generate 0.79 times more return on investment than Hyundai. However, Algonquin Power Utilities is 1.27 times less risky than Hyundai. It trades about -0.25 of its potential returns per unit of risk. Hyundai Motor is currently generating about -0.19 per unit of risk. If you would invest  450.00  in Algonquin Power Utilities on September 22, 2024 and sell it today you would lose (36.00) from holding Algonquin Power Utilities or give up 8.0% of portfolio value over 90 days.

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

Algonquin Power Utilities  vs.  Hyundai Motor

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hyundai Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Motor 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Algonquin Power and Hyundai

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

The idea behind Algonquin Power Utilities and Hyundai Motor 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.