Correlation Between Algonquin Power and Duke Energy

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

Diversification Opportunities for Algonquin Power and Duke Energy

-0.59

Correlation Coefficient

Algonquin Power  Duke Energy

Excellent diversification

The 3 months correlation between Algonquin and Duke is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Duke Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duke Energy 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 Duke Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duke Energy Corp has no effect on the direction of Algonquin Power i.e., Algonquin Power and Duke Energy go up and down completely randomly.

Pair Corralation between Algonquin Power and Duke Energy

Given the investment horizon of 90 days Algonquin Power Utilities is expected to generate 1.08 times more return on investment than Duke Energy. However, Algonquin Power is 1.08 times more volatile than Duke Energy Corp. It trades about 0.07 of its potential returns per unit of risk. Duke Energy Corp is currently generating about 0.02 per unit of risk. If you would invest  2,012  in Algonquin Power Utilities on October 12, 2024 and sell it today you would earn a total of  507.00  from holding Algonquin Power Utilities or generate 25.2% return on investment over 90 days.

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

Algonquin Power Utilities  vs.  Duke Energy Corp

Algonquin Power Utilities

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Algonquin Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Duke Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duke Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, Duke Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Algonquin Power and Duke Energy

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

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