Correlation Between Algonquin Power and Eco Wave

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

Diversification Opportunities for Algonquin Power and Eco Wave

-0.61

Correlation Coefficient

Algonquin Power  Eco Wave

Excellent diversification

The 3 months correlation between Algonquin and Eco is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Eco Wave Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco Wave 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 Eco Wave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco Wave Power has no effect on the direction of Algonquin Power i.e., Algonquin Power and Eco Wave go up and down completely randomly.

Pair Corralation between Algonquin Power and Eco Wave

Considering the 90-day investment horizon Algonquin Power Utilities is expected to generate 0.28 times more return on investment than Eco Wave. However, Algonquin Power Utilities is 3.62 times less risky than Eco Wave. It trades about 0.17 of its potential returns per unit of risk. Eco Wave Power is currently generating about -0.15 per unit of risk. If you would invest  442.00  in Algonquin Power Utilities on December 28, 2024 and sell it today you would earn a total of  77.00  from holding Algonquin Power Utilities or generate 17.42% return on investment over 90 days.

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

Algonquin Power Utilities  vs.  Eco Wave Power

Algonquin Power Utilities

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Algonquin Power displayed solid returns over the last few months and may actually be approaching a breakup point.

Eco Wave Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eco Wave Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Algonquin Power and Eco Wave

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

The idea behind Algonquin Power Utilities and Eco Wave 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.