Correlation Between Algonquin Power and Johnson Matthey

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

Diversification Opportunities for Algonquin Power and Johnson Matthey

0.0

Correlation Coefficient

Algonquin Power  Johnson Matthey

Pay attention - limited upside

The 3 months correlation between Algonquin and Johnson is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Johnson Matthey Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Matthey 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 Johnson Matthey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Matthey Plc has no effect on the direction of Algonquin Power i.e., Algonquin Power and Johnson Matthey go up and down completely randomly.

Pair Corralation between Algonquin Power and Johnson Matthey

If you would invest  420.00  in Algonquin Power Utilities on October 22, 2024 and sell it today you would earn a total of  6.00  from holding Algonquin Power Utilities or generate 1.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Algonquin Power Utilities  vs.  Johnson Matthey Plc

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 uncertain 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.

Johnson Matthey Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Matthey Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Johnson Matthey is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Algonquin Power and Johnson Matthey

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

The idea behind Algonquin Power Utilities and Johnson Matthey Plc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.