Correlation Between Innergex Renewable and Polaris Infrastructure

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

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

Diversification Opportunities for Innergex Renewable and Polaris Infrastructure

-0.53

Correlation Coefficient

Innergex Renewable  Polaris Infrastructure

Excellent diversification

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

Pair Corralation between Innergex Renewable and Polaris Infrastructure

Assuming the 90 days trading horizon Innergex Renewable Energy is expected to under-perform the Polaris Infrastructure. In addition to that, Innergex Renewable is 1.19 times more volatile than Polaris Infrastructure. It trades about -0.04 of its total potential returns per unit of risk. Polaris Infrastructure is currently generating about 0.01 per unit of volatility. If you would invest  1,318  in Polaris Infrastructure on October 10, 2024 and sell it today you would earn a total of  38.00  from holding Polaris Infrastructure or generate 2.88% return on investment over 90 days.

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

Innergex Renewable Energy  vs.  Polaris Infrastructure

Innergex Renewable Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innergex Renewable Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Polaris Infrastructure

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Polaris Infrastructure are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Polaris Infrastructure may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Innergex Renewable and Polaris Infrastructure

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

The idea behind Innergex Renewable Energy and Polaris Infrastructure 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.