Correlation Between Algonquin Power and Athabasca Oil

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

Diversification Opportunities for Algonquin Power and Athabasca Oil

-0.25

Correlation Coefficient

Algonquin Power  Athabasca Oil

Very good diversification

The 3 months correlation between Algonquin and Athabasca is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Athabasca Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Athabasca Oil Corp 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 Athabasca Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Athabasca Oil Corp has no effect on the direction of Algonquin Power i.e., Algonquin Power and Athabasca Oil go up and down completely randomly.

Pair Corralation between Algonquin Power and Athabasca Oil

Assuming the 90 days trading horizon Algonquin Power Utilities is expected to under-perform the Athabasca Oil. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 1.48 times less risky than Athabasca Oil. The stock trades about -0.02 of its potential returns per unit of risk. The Athabasca Oil Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  516.00  in Athabasca Oil Corp on September 3, 2024 and sell it today you would lose (2.00) from holding Athabasca Oil Corp or give up 0.39% of portfolio value over 90 days.

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

Algonquin Power Utilities  vs.  Athabasca Oil Corp

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. In spite of very healthy basic indicators, Algonquin Power is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Athabasca Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Athabasca Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Athabasca Oil 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 Athabasca Oil

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

The idea behind Algonquin Power Utilities and Athabasca Oil Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.