Correlation Between Algonquin Power and FIREWEED METALS

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

Diversification Opportunities for Algonquin Power and FIREWEED METALS

0.55

Correlation Coefficient

Algonquin Power  FIREWEED METALS

Very weak diversification

The 3 months correlation between Algonquin and FIREWEED is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and FIREWEED METALS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIREWEED METALS P 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 FIREWEED METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIREWEED METALS P has no effect on the direction of Algonquin Power i.e., Algonquin Power and FIREWEED METALS go up and down completely randomly.

Pair Corralation between Algonquin Power and FIREWEED METALS

Assuming the 90 days horizon Algonquin Power is expected to generate 1.08 times less return on investment than FIREWEED METALS. But when comparing it to its historical volatility, Algonquin Power Utilities is 1.92 times less risky than FIREWEED METALS. It trades about 0.12 of its potential returns per unit of risk. FIREWEED METALS P is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  96.00  in FIREWEED METALS P on December 30, 2024 and sell it today you would earn a total of  11.00  from holding FIREWEED METALS P or generate 11.46% 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.  FIREWEED METALS P

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 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Algonquin Power reported solid returns over the last few months and may actually be approaching a breakup point.

FIREWEED METALS P

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FIREWEED METALS P are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, FIREWEED METALS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algonquin Power and FIREWEED METALS

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

The idea behind Algonquin Power Utilities and FIREWEED METALS P 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.