Correlation Between Royal Helium and Algonquin Power

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

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

Diversification Opportunities for Royal Helium and Algonquin Power

0.66

Correlation Coefficient

Royal Helium  Algonquin Power

Poor diversification

The 3 months correlation between Royal and Algonquin is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Royal Helium 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 Royal Helium 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 Royal Helium 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 Royal Helium i.e., Royal Helium and Algonquin Power go up and down completely randomly.

Pair Corralation between Royal Helium and Algonquin Power

Assuming the 90 days horizon Royal Helium is expected to generate 170.51 times more return on investment than Algonquin Power. However, Royal Helium is 170.51 times more volatile than Algonquin Power Utilities. It trades about 0.26 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about 0.17 per unit of risk. If you would invest  2.50  in Royal Helium on December 30, 2024 and sell it today you would earn a total of  3,458  from holding Royal Helium or generate 138300.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Royal Helium  vs.  Algonquin Power Utilities

Royal Helium

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Helium are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Royal Helium showed solid returns over the last few months and may actually be approaching a breakup point.

Algonquin Power Utilities

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Algonquin Power displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Helium and Algonquin Power

The main advantage of trading using opposite Royal Helium and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Helium 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 Royal Helium 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.