Correlation Between Algonquin Power and Altus Power

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

Diversification Opportunities for Algonquin Power and Altus Power

-0.53

Correlation Coefficient

Algonquin Power  Altus Power

Excellent diversification

The 3 months correlation between Algonquin and Altus is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Altus Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altus Power 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 Altus Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altus Power has no effect on the direction of Algonquin Power i.e., Algonquin Power and Altus Power go up and down completely randomly.

Pair Corralation between Algonquin Power and Altus Power

Considering the 90-day investment horizon Algonquin Power Utilities is expected to under-perform the Altus Power. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 4.59 times less risky than Altus Power. The stock trades about -0.08 of its potential returns per unit of risk. The Altus Power is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  297.00  in Altus Power on August 31, 2024 and sell it today you would earn a total of  135.00  from holding Altus Power or generate 45.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Algonquin Power Utilities  vs.  Altus Power

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 latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Altus Power

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Altus Power are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Altus Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algonquin Power and Altus Power

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

The idea behind Algonquin Power Utilities and Altus Power 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.