Correlation Between Algonquin Power and Guardian Capital

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

Diversification Opportunities for Algonquin Power and Guardian Capital

-0.26

Correlation Coefficient

Algonquin Power  Guardian Capital

Very good diversification

The 3 months correlation between Algonquin and Guardian is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Guardian Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Capital 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 Guardian Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Capital has no effect on the direction of Algonquin Power i.e., Algonquin Power and Guardian Capital go up and down completely randomly.

Pair Corralation between Algonquin Power and Guardian Capital

Assuming the 90 days trading horizon Algonquin Power is expected to generate 6.07 times less return on investment than Guardian Capital. But when comparing it to its historical volatility, Algonquin Power Utilities is 1.26 times less risky than Guardian Capital. It trades about 0.05 of its potential returns per unit of risk. Guardian Capital Group is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  4,316  in Guardian Capital Group on October 24, 2024 and sell it today you would earn a total of  377.00  from holding Guardian Capital Group or generate 8.73% 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.  Guardian Capital Group

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.

Guardian Capital

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Capital Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Guardian Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algonquin Power and Guardian Capital

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

The idea behind Algonquin Power Utilities and Guardian Capital Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .