Correlation Between Emera and ATCO

Can any of the company-specific risk be diversified away by investing in both Emera and ATCO 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 Emera and ATCO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Emera Inc and ATCO, you can compare the effects of market volatilities on Emera and ATCO 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 Emera with a short position of ATCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emera and ATCO.

Diversification Opportunities for Emera and ATCO

0.44

Correlation Coefficient

Emera  ATCO

Very weak diversification

The 3 months correlation between Emera and ATCO is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Emera Inc and ATCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATCO and Emera 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 Emera Inc are associated (or correlated) with ATCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATCO has no effect on the direction of Emera i.e., Emera and ATCO go up and down completely randomly.

Pair Corralation between Emera and ATCO

Assuming the 90 days trading horizon Emera Inc is expected to generate 0.53 times more return on investment than ATCO. However, Emera Inc is 1.88 times less risky than ATCO. It trades about 0.03 of its potential returns per unit of risk. ATCO is currently generating about -0.04 per unit of risk. If you would invest  5,313  in Emera Inc on September 23, 2024 and sell it today you would earn a total of  52.00  from holding Emera Inc or generate 0.98% return on investment over 90 days.

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

Emera Inc  vs.  ATCO

Emera Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Emera Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Emera is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

ATCO

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ATCO are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ATCO is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Emera and ATCO

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

The idea behind Emera Inc and ATCO 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.