Correlation Between Algonquin Power and SmartCentres Real

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

Diversification Opportunities for Algonquin Power and SmartCentres Real

0.9

Correlation Coefficient

Algonquin Power  SmartCentres Real

Almost no diversification

The 3 months correlation between Algonquin and SmartCentres is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and SmartCentres Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SmartCentres Real Estate 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 SmartCentres Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SmartCentres Real Estate has no effect on the direction of Algonquin Power i.e., Algonquin Power and SmartCentres Real go up and down completely randomly.

Pair Corralation between Algonquin Power and SmartCentres Real

Assuming the 90 days trading horizon Algonquin Power Utilities is expected to under-perform the SmartCentres Real. In addition to that, Algonquin Power is 1.54 times more volatile than SmartCentres Real Estate. It trades about -0.02 of its total potential returns per unit of risk. SmartCentres Real Estate is currently generating about 0.01 per unit of volatility. If you would invest  2,556  in SmartCentres Real Estate on September 2, 2024 and sell it today you would earn a total of  15.00  from holding SmartCentres Real Estate or generate 0.59% return on investment over 90 days.

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

Algonquin Power Utilities  vs.  SmartCentres Real Estate

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 very healthy basic indicators, Algonquin Power is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

SmartCentres Real Estate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SmartCentres Real Estate are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SmartCentres Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Algonquin Power and SmartCentres Real

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

The idea behind Algonquin Power Utilities and SmartCentres Real Estate 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.