Correlation Between Algonquin Power and Helios Fairfax

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

Diversification Opportunities for Algonquin Power and Helios Fairfax

-0.2

Correlation Coefficient

Algonquin Power  Helios Fairfax

Good diversification

The 3 months correlation between Algonquin and Helios is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Helios Fairfax Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helios Fairfax Partners 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 Helios Fairfax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helios Fairfax Partners has no effect on the direction of Algonquin Power i.e., Algonquin Power and Helios Fairfax go up and down completely randomly.

Pair Corralation between Algonquin Power and Helios Fairfax

Assuming the 90 days trading horizon Algonquin Power Utilities is expected to generate 0.13 times more return on investment than Helios Fairfax. However, Algonquin Power Utilities is 7.79 times less risky than Helios Fairfax. It trades about 0.08 of its potential returns per unit of risk. Helios Fairfax Partners is currently generating about -0.02 per unit of risk. If you would invest  2,386  in Algonquin Power Utilities on December 30, 2024 and sell it today you would earn a total of  69.00  from holding Algonquin Power Utilities or generate 2.89% return on investment over 90 days.

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

Algonquin Power Utilities  vs.  Helios Fairfax Partners

Algonquin Power Utilities

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 6 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Helios Fairfax Partners

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Algonquin Power and Helios Fairfax

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

The idea behind Algonquin Power Utilities and Helios Fairfax Partners 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.