Correlation Between Algonquin Power and US FOODS

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

Diversification Opportunities for Algonquin Power and US FOODS

-0.3

Correlation Coefficient

Algonquin Power  US FOODS

Very good diversification

The 3 months correlation between Algonquin and UFH is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and US FOODS HOLDING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US FOODS HOLDING 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 US FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US FOODS HOLDING has no effect on the direction of Algonquin Power i.e., Algonquin Power and US FOODS go up and down completely randomly.

Pair Corralation between Algonquin Power and US FOODS

Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the US FOODS. In addition to that, Algonquin Power is 1.42 times more volatile than US FOODS HOLDING. It trades about -0.02 of its total potential returns per unit of risk. US FOODS HOLDING is currently generating about 0.11 per unit of volatility. If you would invest  6,500  in US FOODS HOLDING on October 27, 2024 and sell it today you would earn a total of  150.00  from holding US FOODS HOLDING or generate 2.31% 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.  US FOODS HOLDING

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.

US FOODS HOLDING

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in US FOODS HOLDING are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, US FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algonquin Power and US FOODS

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

The idea behind Algonquin Power Utilities and US FOODS HOLDING 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.