Correlation Between Algonquin Power and Chemtrade Logistics

Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Chemtrade Logistics 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 Chemtrade Logistics 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 Chemtrade Logistics Income, you can compare the effects of market volatilities on Algonquin Power and Chemtrade Logistics 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 Chemtrade Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Chemtrade Logistics.

Diversification Opportunities for Algonquin Power and Chemtrade Logistics

-0.36

Correlation Coefficient

Algonquin Power  Chemtrade Logistics

Very good diversification

The 3 months correlation between Algonquin and Chemtrade is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Chemtrade Logistics Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemtrade Logistics 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 Chemtrade Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemtrade Logistics has no effect on the direction of Algonquin Power i.e., Algonquin Power and Chemtrade Logistics go up and down completely randomly.

Pair Corralation between Algonquin Power and Chemtrade Logistics

Assuming the 90 days trading horizon Algonquin Power Utilities is expected to under-perform the Chemtrade Logistics. In addition to that, Algonquin Power is 1.15 times more volatile than Chemtrade Logistics Income. It trades about -0.11 of its total potential returns per unit of risk. Chemtrade Logistics Income is currently generating about 0.04 per unit of volatility. If you would invest  1,052  in Chemtrade Logistics Income on September 24, 2024 and sell it today you would earn a total of  34.00  from holding Chemtrade Logistics Income or generate 3.23% return on investment over 90 days.

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

Algonquin Power Utilities  vs.  Chemtrade Logistics Income

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. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Chemtrade Logistics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chemtrade Logistics Income are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Chemtrade Logistics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Algonquin Power and Chemtrade Logistics

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

The idea behind Algonquin Power Utilities and Chemtrade Logistics Income 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.