Correlation Between Altagas Cum and Aecon

Can any of the company-specific risk be diversified away by investing in both Altagas Cum and Aecon 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 Altagas Cum and Aecon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Altagas Cum Red and Aecon Group, you can compare the effects of market volatilities on Altagas Cum and Aecon 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 Altagas Cum with a short position of Aecon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altagas Cum and Aecon.

Diversification Opportunities for Altagas Cum and Aecon

-0.16

Correlation Coefficient

Altagas Cum  Aecon

Good diversification

The 3 months correlation between Altagas and Aecon is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Altagas Cum Red and Aecon Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aecon Group and Altagas Cum 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 Altagas Cum Red are associated (or correlated) with Aecon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aecon Group has no effect on the direction of Altagas Cum i.e., Altagas Cum and Aecon go up and down completely randomly.

Pair Corralation between Altagas Cum and Aecon

Assuming the 90 days trading horizon Altagas Cum is expected to generate 15.12 times less return on investment than Aecon. But when comparing it to its historical volatility, Altagas Cum Red is 3.84 times less risky than Aecon. It trades about 0.07 of its potential returns per unit of risk. Aecon Group is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,813  in Aecon Group on September 2, 2024 and sell it today you would earn a total of  1,065  from holding Aecon Group or generate 58.74% return on investment over 90 days.

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

Altagas Cum Red  vs.  Aecon Group

Altagas Cum Red

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Altagas Cum Red are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Altagas Cum is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Aecon Group

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aecon Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Aecon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Altagas Cum and Aecon

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

The idea behind Altagas Cum Red and Aecon Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.