Correlation Between Vulcan Materials and Algonquin Power

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

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

Diversification Opportunities for Vulcan Materials and Algonquin Power

-0.44

Correlation Coefficient

Vulcan Materials  Algonquin Power

Very good diversification

The 3 months correlation between Vulcan and Algonquin is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials i.e., Vulcan Materials and Algonquin Power go up and down completely randomly.

Pair Corralation between Vulcan Materials and Algonquin Power

Assuming the 90 days horizon Vulcan Materials is expected to under-perform the Algonquin Power. But the stock apears to be less risky and, when comparing its historical volatility, Vulcan Materials is 1.03 times less risky than Algonquin Power. The stock trades about -0.12 of its potential returns per unit of risk. The Algonquin Power Utilities is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  420.00  in Algonquin Power Utilities on December 21, 2024 and sell it today you would earn a total of  46.00  from holding Algonquin Power Utilities or generate 10.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Vulcan Materials  vs.  Algonquin Power Utilities

Vulcan Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vulcan Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Algonquin Power Utilities

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Algonquin Power may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vulcan Materials and Algonquin Power

The main advantage of trading using opposite Vulcan Materials and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Materials 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 Vulcan Materials 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.