Correlation Between Algonquin Power and Alibaba Health

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

Diversification Opportunities for Algonquin Power and Alibaba Health

-0.07

Correlation Coefficient

Algonquin Power  Alibaba Health

Good diversification

The 3 months correlation between Algonquin and Alibaba is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Alibaba Health Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Health Infor 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 Alibaba Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Health Infor has no effect on the direction of Algonquin Power i.e., Algonquin Power and Alibaba Health go up and down completely randomly.

Pair Corralation between Algonquin Power and Alibaba Health

Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the Alibaba Health. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 4.08 times less risky than Alibaba Health. The stock trades about -0.11 of its potential returns per unit of risk. The Alibaba Health Information is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Alibaba Health Information on September 14, 2024 and sell it today you would earn a total of  14.00  from holding Alibaba Health Information or generate 45.16% return on investment over 90 days.

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

Algonquin Power Utilities  vs.  Alibaba Health Information

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 fragile 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.

Alibaba Health Infor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Health Information are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alibaba Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algonquin Power and Alibaba Health

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

The idea behind Algonquin Power Utilities and Alibaba Health Information 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.