Correlation Between Algonquin Power and Infrastructure Dividend

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

Diversification Opportunities for Algonquin Power and Infrastructure Dividend

-0.22

Correlation Coefficient

Algonquin Power  Infrastructure Dividend

Very good diversification

The 3 months correlation between Algonquin and Infrastructure is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Infrastructure Dividend Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infrastructure Dividend 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 Infrastructure Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infrastructure Dividend has no effect on the direction of Algonquin Power i.e., Algonquin Power and Infrastructure Dividend go up and down completely randomly.

Pair Corralation between Algonquin Power and Infrastructure Dividend

Assuming the 90 days trading horizon Algonquin Power is expected to generate 1.73 times less return on investment than Infrastructure Dividend. But when comparing it to its historical volatility, Algonquin Power Utilities is 1.36 times less risky than Infrastructure Dividend. It trades about 0.11 of its potential returns per unit of risk. Infrastructure Dividend Split is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,310  in Infrastructure Dividend Split on September 21, 2024 and sell it today you would earn a total of  173.00  from holding Infrastructure Dividend Split or generate 13.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.06%
Values	Daily Returns

Algonquin Power Utilities  vs.  Infrastructure Dividend Split

Algonquin Power Utilities

Risk-Adjusted Performance

6 of 100

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.

Infrastructure Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infrastructure Dividend Split has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Infrastructure Dividend 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 Infrastructure Dividend

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

The idea behind Algonquin Power Utilities and Infrastructure Dividend Split 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..