Correlation Between Algonquin Power and STORE ELECTRONIC

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

Diversification Opportunities for Algonquin Power and STORE ELECTRONIC

0.64

Correlation Coefficient

Algonquin Power  STORE ELECTRONIC

Poor diversification

The 3 months correlation between Algonquin and STORE is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and STORE ELECTRONIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STORE ELECTRONIC 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 STORE ELECTRONIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STORE ELECTRONIC has no effect on the direction of Algonquin Power i.e., Algonquin Power and STORE ELECTRONIC go up and down completely randomly.

Pair Corralation between Algonquin Power and STORE ELECTRONIC

Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the STORE ELECTRONIC. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 1.52 times less risky than STORE ELECTRONIC. The stock trades about -0.16 of its potential returns per unit of risk. The STORE ELECTRONIC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  15,030  in STORE ELECTRONIC on September 21, 2024 and sell it today you would lose (10.00) from holding STORE ELECTRONIC or give up 0.07% 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.  STORE ELECTRONIC

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 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.

STORE ELECTRONIC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STORE ELECTRONIC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, STORE ELECTRONIC is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Algonquin Power and STORE ELECTRONIC

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

The idea behind Algonquin Power Utilities and STORE ELECTRONIC 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.