Correlation Between Algonquin Power and Vonovia SE

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

Diversification Opportunities for Algonquin Power and Vonovia SE

0.74

Correlation Coefficient

Algonquin Power  Vonovia SE

Poor diversification

The 3 months correlation between Algonquin and Vonovia is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Vonovia SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vonovia SE 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 Vonovia SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vonovia SE has no effect on the direction of Algonquin Power i.e., Algonquin Power and Vonovia SE go up and down completely randomly.

Pair Corralation between Algonquin Power and Vonovia SE

Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the Vonovia SE. In addition to that, Algonquin Power is 1.02 times more volatile than Vonovia SE. It trades about -0.03 of its total potential returns per unit of risk. Vonovia SE is currently generating about 0.04 per unit of volatility. If you would invest  2,570  in Vonovia SE on October 5, 2024 and sell it today you would earn a total of  396.00  from holding Vonovia SE or generate 15.41% return on investment over 90 days.

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

Algonquin Power Utilities  vs.  Vonovia SE

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 unsteady 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.

Vonovia SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vonovia SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Algonquin Power and Vonovia SE

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

The idea behind Algonquin Power Utilities and Vonovia SE 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.

Check out your portfolio center.

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.