Correlation Between Algonquin Power and Solaris Resources

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

Diversification Opportunities for Algonquin Power and Solaris Resources

0.3

Correlation Coefficient

Algonquin Power  Solaris Resources

Weak diversification

The 3 months correlation between Algonquin and Solaris is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Solaris Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solaris Resources 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 Solaris Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solaris Resources has no effect on the direction of Algonquin Power i.e., Algonquin Power and Solaris Resources go up and down completely randomly.

Pair Corralation between Algonquin Power and Solaris Resources

Assuming the 90 days trading horizon Algonquin Power is expected to generate 1.99 times less return on investment than Solaris Resources. But when comparing it to its historical volatility, Algonquin Power Utilities is 1.84 times less risky than Solaris Resources. It trades about 0.04 of its potential returns per unit of risk. Solaris Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  432.00  in Solaris Resources on December 2, 2024 and sell it today you would earn a total of  25.00  from holding Solaris Resources or generate 5.79% return on investment over 90 days.

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

Algonquin Power Utilities  vs.  Solaris Resources

Algonquin Power Utilities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Solaris Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Solaris Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Solaris Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Algonquin Power and Solaris Resources

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

The idea behind Algonquin Power Utilities and Solaris Resources 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.