Correlation Between Algonquin Power and AXA SA

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

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

Diversification Opportunities for Algonquin Power and AXA SA

0.51

Correlation Coefficient

Algonquin Power  AXA SA

Very weak diversification

The 3 months correlation between Algonquin and AXA is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and AXA SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXA SA and Algonquin Power 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 Algonquin Power Utilities are associated (or correlated) with AXA SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXA SA has no effect on the direction of Algonquin Power i.e., Algonquin Power and AXA SA go up and down completely randomly.

Pair Corralation between Algonquin Power and AXA SA

Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the AXA SA. In addition to that, Algonquin Power is 1.09 times more volatile than AXA SA. It trades about -0.15 of its total potential returns per unit of risk. AXA SA is currently generating about 0.0 per unit of volatility. If you would invest  3,366  in AXA SA on September 15, 2024 and sell it today you would lose (8.00) from holding AXA SA or give up 0.24% of portfolio value over 90 days.

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

Algonquin Power Utilities  vs.  AXA SA

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 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.

AXA SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AXA SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Pair Trading with Algonquin Power and AXA SA

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

The idea behind Algonquin Power Utilities and AXA SA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.