Correlation Between Algonquin Power and Pfizer

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

Diversification Opportunities for Algonquin Power and Pfizer

0.15

Correlation Coefficient

Algonquin Power  Pfizer

Average diversification

The 3 months correlation between Algonquin and Pfizer is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Pfizer Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc CDR 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 Pfizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfizer Inc CDR has no effect on the direction of Algonquin Power i.e., Algonquin Power and Pfizer go up and down completely randomly.

Pair Corralation between Algonquin Power and Pfizer

Assuming the 90 days trading horizon Algonquin Power Utilities is expected to generate 0.6 times more return on investment than Pfizer. However, Algonquin Power Utilities is 1.68 times less risky than Pfizer. It trades about 0.12 of its potential returns per unit of risk. Pfizer Inc CDR is currently generating about -0.03 per unit of risk. If you would invest  1,752  in Algonquin Power Utilities on October 5, 2024 and sell it today you would earn a total of  698.00  from holding Algonquin Power Utilities or generate 39.84% return on investment over 90 days.

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

Algonquin Power Utilities  vs.  Pfizer Inc CDR

Algonquin Power Utilities

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 4 (%) 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.

Pfizer Inc CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pfizer Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Algonquin Power and Pfizer

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

The idea behind Algonquin Power Utilities and Pfizer Inc CDR 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.