Correlation Between Algonquin Power and Canlan Ice

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

Diversification Opportunities for Algonquin Power and Canlan Ice

-0.49

Correlation Coefficient

Algonquin Power  Canlan Ice

Very good diversification

The 3 months correlation between Algonquin and Canlan is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Canlan Ice Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canlan Ice Sports 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 Canlan Ice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canlan Ice Sports has no effect on the direction of Algonquin Power i.e., Algonquin Power and Canlan Ice go up and down completely randomly.

Pair Corralation between Algonquin Power and Canlan Ice

Assuming the 90 days trading horizon Algonquin Power Utilities is expected to under-perform the Canlan Ice. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 1.16 times less risky than Canlan Ice. The stock trades about -0.14 of its potential returns per unit of risk. The Canlan Ice Sports is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  397.00  in Canlan Ice Sports on September 13, 2024 and sell it today you would earn a total of  12.00  from holding Canlan Ice Sports or generate 3.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Algonquin Power Utilities  vs.  Canlan Ice Sports

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Canlan Ice Sports

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Algonquin Power and Canlan Ice

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

The idea behind Algonquin Power Utilities and Canlan Ice Sports 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.