Correlation Between Algonquin Power and Fortis Srs

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

Diversification Opportunities for Algonquin Power and Fortis Srs

0.69

Correlation Coefficient

Algonquin Power  Fortis Srs

Poor diversification

The 3 months correlation between Algonquin and Fortis is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Fortis Srs J in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortis Srs J 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 Fortis Srs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortis Srs J has no effect on the direction of Algonquin Power i.e., Algonquin Power and Fortis Srs go up and down completely randomly.

Pair Corralation between Algonquin Power and Fortis Srs

Assuming the 90 days trading horizon Algonquin Power Utilities is expected to generate 1.03 times more return on investment than Fortis Srs. However, Algonquin Power is 1.03 times more volatile than Fortis Srs J. It trades about 0.01 of its potential returns per unit of risk. Fortis Srs J is currently generating about -0.08 per unit of risk. If you would invest  2,342  in Algonquin Power Utilities on September 5, 2024 and sell it today you would earn a total of  9.00  from holding Algonquin Power Utilities or generate 0.38% 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.  Fortis Srs J

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 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.

Fortis Srs J

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Algonquin Power and Fortis Srs

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

The idea behind Algonquin Power Utilities and Fortis Srs J 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..