Correlation Between Algonquin Power and Yamaha

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

Diversification Opportunities for Algonquin Power and Yamaha

0.33

Correlation Coefficient

Algonquin Power  Yamaha

Weak diversification

The 3 months correlation between Algonquin and Yamaha is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Yamaha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yamaha 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 Yamaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yamaha has no effect on the direction of Algonquin Power i.e., Algonquin Power and Yamaha go up and down completely randomly.

Pair Corralation between Algonquin Power and Yamaha

Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the Yamaha. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 1.32 times less risky than Yamaha. The stock trades about -0.12 of its potential returns per unit of risk. The Yamaha is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  671.00  in Yamaha on October 10, 2024 and sell it today you would earn a total of  5.00  from holding Yamaha or generate 0.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Algonquin Power Utilities  vs.  Yamaha

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Yamaha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yamaha has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Algonquin Power and Yamaha

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

The idea behind Algonquin Power Utilities and Yamaha 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.