Correlation Between Albemarle and EMERA

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

By analyzing existing cross correlation between Albemarle and EMERA FIN LP, you can compare the effects of market volatilities on Albemarle and EMERA 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 Albemarle with a short position of EMERA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Albemarle and EMERA.

Diversification Opportunities for Albemarle and EMERA

0.73

Correlation Coefficient

Albemarle  EMERA

Poor diversification

The 3 months correlation between Albemarle and EMERA is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Albemarle and EMERA FIN LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMERA FIN LP and Albemarle 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 Albemarle are associated (or correlated) with EMERA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMERA FIN LP has no effect on the direction of Albemarle i.e., Albemarle and EMERA go up and down completely randomly.

Pair Corralation between Albemarle and EMERA

Assuming the 90 days trading horizon Albemarle is expected to generate 0.96 times more return on investment than EMERA. However, Albemarle is 1.04 times less risky than EMERA. It trades about 0.05 of its potential returns per unit of risk. EMERA FIN LP is currently generating about -0.23 per unit of risk. If you would invest  4,184  in Albemarle on October 27, 2024 and sell it today you would earn a total of  71.00  from holding Albemarle or generate 1.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Albemarle  vs.  EMERA FIN LP

Albemarle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Albemarle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Albemarle is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

EMERA FIN LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EMERA FIN LP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EMERA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Albemarle and EMERA

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

The idea behind Albemarle and EMERA FIN LP 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.