Correlation Between United States and Algonquin Power

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

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

Diversification Opportunities for United States and Algonquin Power

-0.03

Correlation Coefficient

United States  Algonquin Power

Good diversification

The 3 months correlation between United and Algonquin is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding United States Cellular 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 United States 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 United States Cellular 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 United States i.e., United States and Algonquin Power go up and down completely randomly.

Pair Corralation between United States and Algonquin Power

Considering the 90-day investment horizon United States Cellular is expected to generate 2.89 times more return on investment than Algonquin Power. However, United States is 2.89 times more volatile than Algonquin Power Utilities. It trades about 0.05 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about 0.07 per unit of risk. If you would invest  1,469  in United States Cellular on October 12, 2024 and sell it today you would earn a total of  751.00  from holding United States Cellular or generate 51.12% return on investment over 90 days.

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

United States Cellular  vs.  Algonquin Power Utilities

United States Cellular

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United States Cellular are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, United States is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Algonquin Power Utilities

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Algonquin Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United States and Algonquin Power

The main advantage of trading using opposite United States and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Cellular 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.