Correlation Between Green Impact and Algonquin Power

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

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

Diversification Opportunities for Green Impact and Algonquin Power

0.47

Correlation Coefficient

Green Impact  Algonquin Power

Very weak diversification

The 3 months correlation between Green and Algonquin is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Green Impact Partners 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 Green Impact 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 Green Impact Partners 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 Green Impact i.e., Green Impact and Algonquin Power go up and down completely randomly.

Pair Corralation between Green Impact and Algonquin Power

Assuming the 90 days horizon Green Impact Partners is expected to generate 1.59 times more return on investment than Algonquin Power. However, Green Impact is 1.59 times more volatile than Algonquin Power Utilities. It trades about 0.01 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about -0.16 per unit of risk. If you would invest  230.00  in Green Impact Partners on September 13, 2024 and sell it today you would lose (1.00) from holding Green Impact Partners or give up 0.43% of portfolio value over 90 days.

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

Green Impact Partners  vs.  Algonquin Power Utilities

Green Impact Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Impact Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Green Impact is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 unsteady 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.

Pair Trading with Green Impact and Algonquin Power

The main advantage of trading using opposite Green Impact and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Green Impact 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 Green Impact Partners 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.