Correlation Between Algonquin Power and Orix Corp

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

Diversification Opportunities for Algonquin Power and Orix Corp

-0.03

Correlation Coefficient

Algonquin Power  Orix Corp

Good diversification

The 3 months correlation between Algonquin and Orix is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Orix Corp Ads in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orix Corp Ads 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 Orix Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orix Corp Ads has no effect on the direction of Algonquin Power i.e., Algonquin Power and Orix Corp go up and down completely randomly.

Pair Corralation between Algonquin Power and Orix Corp

Assuming the 90 days horizon Algonquin Power is expected to generate 2.08 times less return on investment than Orix Corp. But when comparing it to its historical volatility, Algonquin Power Utilities is 1.02 times less risky than Orix Corp. It trades about 0.05 of its potential returns per unit of risk. Orix Corp Ads is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9,700  in Orix Corp Ads on October 6, 2024 and sell it today you would earn a total of  600.00  from holding Orix Corp Ads or generate 6.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

Algonquin Power Utilities  vs.  Orix Corp Ads

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.

Orix Corp Ads

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orix Corp Ads are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Orix Corp is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Algonquin Power and Orix Corp

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

The idea behind Algonquin Power Utilities and Orix Corp Ads 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.