Correlation Between PPG Industries and Algonquin Power

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

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

Diversification Opportunities for PPG Industries and Algonquin Power

0.34

Correlation Coefficient

PPG Industries  Algonquin Power

Weak diversification

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

Pair Corralation between PPG Industries and Algonquin Power

Assuming the 90 days horizon PPG Industries is expected to under-perform the Algonquin Power. But the stock apears to be less risky and, when comparing its historical volatility, PPG Industries is 1.83 times less risky than Algonquin Power. The stock trades about -0.6 of its potential returns per unit of risk. The Algonquin Power Utilities is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  445.00  in Algonquin Power Utilities on October 8, 2024 and sell it today you would lose (8.00) from holding Algonquin Power Utilities or give up 1.8% of portfolio value over 90 days.

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

PPG Industries  vs.  Algonquin Power Utilities

PPG Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PPG Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PPG Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Algonquin Power Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Algonquin Power Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Algonquin Power is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PPG Industries and Algonquin Power

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

The idea behind PPG Industries and Algonquin Power Utilities 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..