Correlation Between Algonquin Power and Telus Corp

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

Diversification Opportunities for Algonquin Power and Telus Corp

0.76

Correlation Coefficient

Algonquin Power  Telus Corp

Poor diversification

The 3 months correlation between Algonquin and Telus is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Telus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telus 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 Telus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telus Corp has no effect on the direction of Algonquin Power i.e., Algonquin Power and Telus Corp go up and down completely randomly.

Pair Corralation between Algonquin Power and Telus Corp

Assuming the 90 days trading horizon Algonquin Power Utilities is expected to under-perform the Telus Corp. In addition to that, Algonquin Power is 1.37 times more volatile than Telus Corp. It trades about -0.05 of its total potential returns per unit of risk. Telus Corp is currently generating about -0.01 per unit of volatility. If you would invest  2,208  in Telus Corp on September 4, 2024 and sell it today you would lose (18.00) from holding Telus Corp or give up 0.82% of portfolio value over 90 days.

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

Algonquin Power Utilities  vs.  Telus 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.

Telus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Telus Corp is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Algonquin Power and Telus Corp

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

The idea behind Algonquin Power Utilities and Telus 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..