Correlation Between Algonquin Power and GE Vernova

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

Diversification Opportunities for Algonquin Power and GE Vernova

-0.34

Correlation Coefficient

Algonquin Power  GE Vernova

Very good diversification

The 3 months correlation between Algonquin and GEV is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and GE Vernova LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Vernova LLC 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 GE Vernova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Vernova LLC has no effect on the direction of Algonquin Power i.e., Algonquin Power and GE Vernova go up and down completely randomly.

Pair Corralation between Algonquin Power and GE Vernova

Considering the 90-day investment horizon Algonquin Power Utilities is expected to generate 0.4 times more return on investment than GE Vernova. However, Algonquin Power Utilities is 2.47 times less risky than GE Vernova. It trades about 0.01 of its potential returns per unit of risk. GE Vernova LLC is currently generating about 0.0 per unit of risk. If you would invest  488.00  in Algonquin Power Utilities on November 28, 2024 and sell it today you would lose (1.00) from holding Algonquin Power Utilities or give up 0.2% of portfolio value over 90 days.

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

Algonquin Power Utilities  vs.  GE Vernova LLC

Algonquin Power Utilities

Risk-Adjusted Performance

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 latest stock price disarray, may contribute to short-term losses for the investors.

GE Vernova LLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days GE Vernova LLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, GE Vernova is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Algonquin Power and GE Vernova

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

The idea behind Algonquin Power Utilities and GE Vernova LLC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.