Correlation Between Algonquin Power and Accelerate Canadian

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

Diversification Opportunities for Algonquin Power and Accelerate Canadian

-0.82

Correlation Coefficient

Algonquin Power  Accelerate Canadian

Pay attention - limited upside

The 3 months correlation between Algonquin and Accelerate is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Accelerate Canadian Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accelerate Canadian Long 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 Accelerate Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accelerate Canadian Long has no effect on the direction of Algonquin Power i.e., Algonquin Power and Accelerate Canadian go up and down completely randomly.

Pair Corralation between Algonquin Power and Accelerate Canadian

Assuming the 90 days trading horizon Algonquin Power Utilities is expected to under-perform the Accelerate Canadian. In addition to that, Algonquin Power is 2.33 times more volatile than Accelerate Canadian Long. It trades about -0.16 of its total potential returns per unit of risk. Accelerate Canadian Long is currently generating about 0.26 per unit of volatility. If you would invest  2,454  in Accelerate Canadian Long on September 16, 2024 and sell it today you would earn a total of  265.00  from holding Accelerate Canadian Long or generate 10.8% return on investment over 90 days.

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

Algonquin Power Utilities  vs.  Accelerate Canadian Long

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Accelerate Canadian Long

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Accelerate Canadian Long are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Accelerate Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Algonquin Power and Accelerate Canadian

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

The idea behind Algonquin Power Utilities and Accelerate Canadian Long 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.