Correlation Between Algonquin Power and Alamos Gold

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

Diversification Opportunities for Algonquin Power and Alamos Gold

0.32

Correlation Coefficient

Algonquin Power  Alamos Gold

Weak diversification

The 3 months correlation between Algonquin and Alamos is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Alamos Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamos Gold 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 Alamos Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamos Gold has no effect on the direction of Algonquin Power i.e., Algonquin Power and Alamos Gold go up and down completely randomly.

Pair Corralation between Algonquin Power and Alamos Gold

Assuming the 90 days trading horizon Algonquin Power is expected to generate 4.82 times less return on investment than Alamos Gold. But when comparing it to its historical volatility, Algonquin Power Utilities is 4.21 times less risky than Alamos Gold. It trades about 0.07 of its potential returns per unit of risk. Alamos Gold is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,705  in Alamos Gold on September 13, 2024 and sell it today you would earn a total of  183.00  from holding Alamos Gold or generate 6.77% return on investment over 90 days.

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

Algonquin Power Utilities  vs.  Alamos Gold

Algonquin Power Utilities

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Algonquin Power is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Alamos Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alamos Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Alamos Gold is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Algonquin Power and Alamos Gold

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

The idea behind Algonquin Power Utilities and Alamos Gold 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.