Correlation Between Prosiebensat and Algonquin Power

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

By analyzing existing cross correlation between Prosiebensat 1 Media and Algonquin Power Utilities, you can compare the effects of market volatilities on Prosiebensat 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 Prosiebensat with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosiebensat and Algonquin Power.

Diversification Opportunities for Prosiebensat and Algonquin Power

0.41

Correlation Coefficient

Prosiebensat  Algonquin Power

Very weak diversification

The 3 months correlation between Prosiebensat and Algonquin is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Prosiebensat 1 Media 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 Prosiebensat 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 Prosiebensat 1 Media 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 Prosiebensat i.e., Prosiebensat and Algonquin Power go up and down completely randomly.

Pair Corralation between Prosiebensat and Algonquin Power

Assuming the 90 days trading horizon Prosiebensat 1 Media is expected to generate 2.18 times more return on investment than Algonquin Power. However, Prosiebensat is 2.18 times more volatile than Algonquin Power Utilities. It trades about 0.1 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about -0.21 per unit of risk. If you would invest  477.00  in Prosiebensat 1 Media on September 22, 2024 and sell it today you would earn a total of  30.00  from holding Prosiebensat 1 Media or generate 6.29% return on investment over 90 days.

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

Prosiebensat 1 Media  vs.  Algonquin Power Utilities

Prosiebensat 1 Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prosiebensat 1 Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Prosiebensat and Algonquin Power

The main advantage of trading using opposite Prosiebensat and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosiebensat 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 Prosiebensat 1 Media 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.